Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1350.
Add a stop-loss at 1.1550.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1550.
Add a stop-loss at 1.1350.
The EUR/USD pair rose for the second consecutive day after the US published another weak inflation report. It jumped to 1.1482, its highest point since June 18, with traders waiting for the upcoming retail sales and pending home sales reports.
US Retail Sales Data and EU Inflation Report
The EUR/USD pair rose after another report showed that inflation moved downwards before the current phase of the war between the US and Iran. The Producer Price Index (PPI) dropped from 6% in May to 5.5% in June. Economists were expecting the data to show that the PPI rose 6.2%.
A separate report released on Tuesday showed that the headline Consumer Price Index (CPI) dropped from 4.2% in May to 3.5% in June, while the core CPI moved to 2.5%.
These numbers, however, while encouraging, have been undercut by the ongoing US-Iran war that has started pushing crude oil prices higher. Brent and the West Texas Intermediate (WTI) have jumped by 20% from the lowest level last month.
The next key macro data to watch today will be retail sales and the pending home sales numbers. Economists expect the retail sales report to show that the volume rose 0.2% in June after going up by 0.9% in the previous month.
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The pending home sales are expected to come in at minus 0.5% after rising by 3.8% in May. These numbers will help the Federal Reserve when making its interest rate decision later this month.
Economists expect the bank to leave rates unchanged between 3.50% and 3.75% in this meeting, and possibly hike later this year.
There will be no major macro data from Europe today. As such, traders will be focusing on the upcoming European inflation data, which will help the ECB when making its decision. In a statement on Wednesday, Joachim Nagel, the head of the German Central Bank argued that the bank should leave rates unchanged despite the potential for high inflation.
EUR/USD Technical Analysis
The EUR/USD pair has bounced back in the past two consecutive days as traders reacted to the US inflation data. Still, it is too early to predict whether the pair has finally turned the tide. For one, it has formed a bearish flag pattern and has now retested the upper side of the channel. It has remained below the 50-day moving average.
Therefore, the pair will likely reverse later today, as the recent momentum wanes. If this happens, it may retest the key support level of 1.1400, followed by the June low of 1.1325.
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