Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1650.
Add a stop-loss at 1.1400.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1400.
Add a stop-loss at 1.1650.
The EUR/USD pair wavered overnight as investors embraced a risk-on sentiment as oil prices plunged. It also wavered as traders waited for the upcoming US services PMI and jobs numbers. It was trading at 1.1525, a few points above last week’s low of 1.1353.
Traders Embrace a Risk-On Sentiment
The EUR/USD pair was trading in a tight range as traders rushed to risky assets after a statement from Secretary Scott Bessent. In a statement, he said that talks to reopen the Strait of Hormuz were at an advanced stage. As a result, crude oil prices continued falling, with Brent and the West Texas Intermediate (WTI) moving to $79 and $76.
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These events pushed the stock market to record highs. The Dow Jones jumped by over 1,000 points, while the S&P 500 and Nasdaq 100 indices surged by 131 and 600 points, respectively. US bond yields pulled back, with the ten-year and five-year falling to 4.6% and 4.3%, respectively.
Falling oil prices mean that inflation will be contained, reducing the possibility that the Federal Reserve will hike interest rates this year. Odds that the bank will hike rates dropped to 63% on Polymarket. Last week, these odds peaked at 78% after the Federal Reserve left rates unchanged.
The EUR/USD pair will next react to the latest US services PMI and jobs data. A report by ADP is expected to show that the economy created 68k jobs in July after adding 98k in the previous month. This report will come two days before the official nonfarm payrolls on Friday.
ISM and S&P Global will publish their services PMI numbers. Economists expect S&P Global’s PMI report to show that the service PMI rose to 53.6 in Jul. The ISM figure is expected to move from 54 to 54.5.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair rebounded after last week’s Federal Reserve interest rate decision and the Personal Consumption Expenditure (PCE) report.
It moved above the important resistance level of 1.1480, the neckline of the double-bottom pattern at 1.1355. This pattern normally leads to more upside in most periods.
The most important aspect is that the pair has found a significant resistance at the 200-day Exponential Moving Average (EMA). Ideally, for more gains to continue, the pair will need to move above this dynamic resistance.
A volume-supported move above that average will point to more gains, potentially to the key resistance at 1.1650.
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