Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1450.
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 1.1450.
EUR/USD pair continued its recent downtrend, moving to its lowest level since July 30, and by 2.15% from its highest point in August. This retreat happened as US gasoline and diesel prices continued to rise despite falling oil prices.
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Federal Reserve and ECB Officials' Statements
The EUR/USD pair retreated as investors continued to react to the recent European Central Bank (ECB) and Federal Reserve interest rate decisions. The two banks decided to hike interest rates by 0.25% to counter the elevated inflation.
Sadly, there are signs that interest rate hikes will not lead to lower inflation because of the cause. Inflation is rising because of the ongoing war in the Middle East that has pushed crude oil prices higher. While oil prices have eased this week, gasoline and diesel prices have continued to rise. The average gasoline and diesel prices have jumped to $4.47 and $6.51, respectively.
Focus today will be on statements from key central bank officials. Christine Lagarde, the head of the European Central Bank (ECB) will talk and provide more information about the economy and what to expect. Traders on Polymarket and other prediction platforms believe that the bank will hike rates.
Fed officials like John Williams and Tom Barkin will also talk today, a few days after the Federal Reserve decided to hike interest rates. In his statement on Monday, Austan Goolsbee, a top Fed official, said that the bank should adopt an aggressive and frontloaded policy response to battle inflation.
The EUR/USD pair will also react to the upcoming meeting between President Donald Trump and Xi Jinping. It will also react to the upcoming flash manufacturing and services PMI numbers, which will provide more information about the state of the economies.
EUR/USD Technical Analysis
The four-hour chart shows that the EUR/USD pair has slumped in the past few weeks. As a result, it has moved below the middle line of the Bollinger Bands and the 50-period Exponential Moving Average (EMA).
Notably, the pair has formed a bearish flag pattern, a common continuation sign. This pattern happens after an asset drops sharply and is then followed by a horizontal channel. It has also remained below the Supertrend indicator.
Therefore, the pair will likely have a bearish breakout, potentially to the key support level of 1.1350. The bearish outlook will be invalidated if it moves above the upper side of the flag at 1.1500.
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