Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1500.
Add a stop-loss at 1.1700.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1700.
Add a stop-loss at 1.1500.
The EUR/USD pair rose to its highest point since June 5 as market participants reacted to the US-Iran deal to reopen the Strait of Hormuz. It jumped to the key resistance level of 1.1600, up modestly from last week’s low of 1.1500, as focus now shifts to the upcoming Federal Reserve decision and US retail sales report.
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Risk-On Sentiment After US-Iran Deal
The EUR/USD pair held steady this week, reaching its highest level since June 5 of this year. This rebound happened after President Donald Trump announced his memorandum of understanding (MoU) with the Iranians. In this phase of the deal, Iran will reopen the Strait of Hormuz in exchange for some sanctions relief and a down payment of their frozen funds.
The announcement led to a major risk-on sentiment in the market, with crude oil prices continuing to fall. Also, global stocks surged, with the S&P 500, Dow Jones, and Nasdaq 100 indices jumping to a record high. Crypto prices also rebounded.
The falling crude oil prices mean that inflation may start falling. Data released last week showed that the headline Consumer Price Index (CPI) and the Producer Price Index (PPI) soared to 4.2% and 6.5%, respectively.
The next key catalyst for the EUR/USD pair will be the upcoming US retail sales report. Economists expect the data to show that the headline retail sales rose 4.0% in May after rising by 4.9% in the previous month. Core retail sales are expected to come in at 0.5% MoM.
The Federal Reserve will deliver its interest rate decision on Wednesday. Economists expect the bank to leave interest rates unchanged between 3.50% and 3.70%. This meeting will be important as it will be the first one led by Kevin Warsh, who took over the bank in May.
EUR/USD Technical Analysis
The EUR/USD pair has held steady in the past few days, moving from a low of 1.1500 in June to 1.1600 today. Still, the pair remains below the 50-day Exponential Moving Average (EMA). It has also remained slightly below the Supertrend indicator.
The pair retested the upper side of the descending channel. It has also formed a small shooting star candlestick pattern. Therefore, the pair will likely resume the downtrend, potentially to the lower side of the channel at 1.1500. A move above the upper side of the descending channel will invalidate the bearish outlook.
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