Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0670.
- Add a stop-loss at 1.0800.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0745 and a take-profit at 1.0825.
- Add a stop-loss at 1.0670.
The EUR/USD pair drifted upwards after the relatively strong European inflation data and mixed US economic data. It rose to a high of 1.0760 on Tuesday, much higher than last Friday’s low of 1.0670.
US retail sales data
The EUR/USD exchange rate rebounded after Eurostat published strong inflation data from Europe. According to the statistics agency, the headline consumer price index (CPI) rose from 2.4% in April to 2.6% in May. It dropped from 0.6% to 0.2% on a month-on-month basis.
The core inflation data, which excludes the volatile food and energy products, rose from 2.7% to 2.9%. These numbers mean that the bloc’s inflation is rising slowly and the trend could continue after this month’s rate cut.
In several statements, Federal Reserve officials have hinted that inflation will need to drop meaningfully to justify a rate cut in September.
The euro also bounced back after ECB officials dismissed the idea that it could start buying government bonds after the recent announcement of a snap election in France. Since then, government bonds in the country have sold off as investors anticipate that Rassemblement National could win the election.
While Philip Lane and Christine Lagarde have dismissed the idea of buying French bonds, analysts believe that an intensification of the sell-off will push it to respond.
The EUR/USD pair also rebounded after the mixed economic numbers from the US. The numbers revealed that the core retail sales dropped by 0.1% in May while the headline figure rose by just 0.1%.Retail sales are important numbers because they are indicators of consumer spending.
Other numbers revealed that the country’s capacity utilization rate rallied by 78.7% while industrial production jumped by 0.9%. These economic numbers were bigger than the median estimate of 78.6% and 0.3%.
The data came after the Federal Reserve left interest rates unchanged and hinted that it will only deliver one cut this year.
EUR/USD Technical Analysis
The EUR/USD exchange rate has drifted upwards in the past few days. It has moved from last Friday’s low of 1.0670 to the current 1.0740. The pair has dropped below the 50-period moving average and formed a bearish flag chart pattern.
It has also jumped above the Woodie pivot point while the two lines of the MACD have formed a bullish crossover. The Awesome Oscillator has also continued rising. Therefore, because of the bearish flag, the pair will likely resume the bearish trend. If this happens, the next point to watch will be at 1.0670.
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