Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0700.
- Add a stop-loss at 1.0900.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0845 and a take-profit at 1.0900.
- Add a stop-loss at 1.0750.
The EUR/USD exchange rate held steady overnight as traders focused on Jerome Powell’s statement and the upcoming US inflation data. The pair was trading at the important psychological level of 1.0800, higher than this month’s low of 1.0665.
Federal Reserve rate cuts
The EUR/USD pair has held steady in the past few weeks as investors assessed the next actions by the Federal Reserve and the European Central Bank (ECB).
In its recent meeting, the ECB decided to slash interest rates by 0.25% and has now started a wait-and-see approach to determine when to deliver another cut. Most economists expect that the bank will leave rates intact when it concludes its two-day meeting on Thursday next week.
In a testimony in Congress on Tuesday, Jerome Powell said that he welcomed the recent encouraging inflation data from the US. He also warned that the bank would be patient when determining when to start cutting.
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The Fed has room to be more data to see before it meets on July 31st. For example, the Bureau of Labor Statistics (BLS) will publish June’s consumer inflation data on Thursday. These numbers will provide more information about whether prices continued moving downwards during the month.
A positive report will point to a potential rate cut in its September or December meeting. A September cut will likely be signaled during the Jackson Hole Symposium in August.
On the other hand, if the CPI report comes out higher than expected, it will signal that the Fed will hold interest rates higher for longer.
The CPI data will come a few days after the US published mixed jobs numbers. In a report, the BLS said that the economy created over 202k jobs in June while wage growth slowed and the unemployment rate rose to 4.1%.
EUR/USD technical analysis
The daily chart shows that the EUR/USD pair has held steady in the past few days. It has rebounded from this month’s low of 1.0665 to a high of 1.0845 on Tuesday.
The pair has risen slightly above the 50-day Exponential Moving Average (EMA) and formed a symmetrical triangle pattern, which is nearing its confluence level.
Also, the Relative Strength Index (RSI) has moved above the neutral point at 50 while the MACD is about to cross the zero line.
Therefore, the pair will likely pull back as sellers target the lower side of the triangle pattern at 1.0700.
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