Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1500.
Add a stop-loss at 1.1650.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1650.
Add a stop-loss at 1.1500.
The EUR/USD pair rose to its highest point since June this year and then pulled back to 1.1575 ahead of several important events from the US and the European Union. It has jumped by over 2.25% from its lowest level this year.
FOMC Minutes and Key Macro Data
The EUR/USD pair rose as investors shifted the outlooks for the Federal Reserve and European Central Bank (ECB) decisions. Economists have reduced their optimism that the Fed will hike interest rates later this year after the recent macro data from the US. Earlier this month, a report showed that the economy lost 23,000 jobs.
More reports released last week showed that the headline and core consumer and producer inflation numbers dropped in July. While they remain above the Fed’s 2% target, the downward trend is encouraging. Another report revealed that the US retail sales dropped sharply in July this year.
The next important data from the US will be the upcoming housing starts and building permits that come out later today. Also, the Federal Reserve will publish minutes of the last meeting on Wednesday. These minutes will provide more information about the last meeting.
The EUR/USD pair will next react to the upcoming European inflation report on Thursday. Economists expect the data to show that the headline and core inflation figures remained above 2% in July. As a result, analysts expect the ECB to hike interest rates later this year.
Further, the pair is reacting to the ongoing situation in the Middle East, where the US and Iran war has stalled. As a result, oil prices have dropped from their year-to-date highs to below $90 a barrel.
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EUR/USD Technical Analysis
The daily pair shows that the EUR/USD pair peaked at 1.1615 on Monday and then pared back some of these gains. It has now formed a shooting star candlestick pattern, which is made up of a small body and a long upper shadow.
The pair has formed an ascending channel and is now inside it. It remains slightly above the 50-day moving average, while the Average Directional Index (ADX) has jumped to 30, its highest point since July, a sign that the momentum is still strong.
Therefore, the most likely scenario is where the pair pulls back, potentially to 1.1500. The bearish outlook will become invalid if it moves above the key resistance level at 1.1615. Such a move will point to more gains in the near term.
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