Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1300.
Add a stop-loss at 1.1510.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1510.
Add a stop-loss at 1.1300.
The EUR/USD exchange rate has wavered in the past few days as traders reacted to last week’s US consumer and producer inflation report. It also reacted to the rising crude oil prices as the US and Iran escalated their attacks. It was trading at 1.1438, inside a range it has been in the past few days.
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ECB Interest Rate Decision Ahead
The EUR/USD pair wavered after the US published the latest consumer and producer inflation data. A report released last week showed that the US CPI and PPI numbers retreated in June after the US and Iran entered their ceasefire, which led to a significantly lower gasoline oil prices.
The headline Consumer and Producer inflation numbers dropped to 3.5% and 5.5% in June. These numbers were moving in the right direction, which, in theory, should reduce the odds that the Federal Reserve will hike interest rates.
A day before the US published the inflation report, Christopher Waller, a top Fed dove, said that he would support hiking interest rates later this year if core inflation remained stubbornly above 2%.
The EUR/USD pair remained on edge as investors reacted to the ongoing trends in the Middle East, where the two sides continued fighting during the weekend. As a result, crude oil prices continued rising, with Brent crossing the psychological level of $90 for the first time in over a month.
The main catalyst for the pair is the upcoming European Central Bank (ECB) decision later this week. Economists expect the bank to leave interest rates unchanged at 2.4% in this meeting.
Officials may decide to hike interest rates later this month if the new phase of the war leads to high inflation. Similarly, odds that the Federal Reserve hiking interest rates later this year have remained at an elevated level.
EUR/USD Technical Analysis
Technicals suggest that the EUR/USD pair is at risk of more downside in the near term. It has formed an ascending channel, which is part of the bearish flag pattern, a common bearish signal.
The pair has remained below the 50-day Exponential Moving Average (EMA). It is also attempting to move below the key support level of 1.1412, its lowest level on March 13 this year.
Therefore, the pair will likely have a bearish breakout, potentially to a low of 1.1300. A move above the upper channel will point to more gains later this year.
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