Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0760.
- Add a stop-loss at 1.0820.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0820.
- Add a stop-loss at 1.0760.
The EUR/USD pair rose to its highest level since June 12th as the US dollar index continued its downtrend. It rallied to 1.0817, higher than last month’s low of 1.0665 as the focus now turn to the US nonfarm payrolls data.
US jobs data ahead
The EUR/USD pair rose after the ADP published relatively weak private payrolls data on Wednesday. The report showed that the private sector added 150k jobs in June, lower than the median estimate of 163k. This figure was also lower than the previous 157k and is a sign that the economy was slowing.
A separate report by ISM showed that the non-manufacturing PMI retreated from 53.8 in May to 48.8 in June, lower than the median estimate of 56.7.
These numbers confirmed that the economy was slowing, which could push the Fed to start cutting interest rates later this year.
However, Fed minutes released during the American session showed that officials want more evidence that inflation was falling to determine when to start cutting interest rates.
The minutes confirmed what Jerome Powell said on Tuesday. In his statement, he welcomed the recent inflation numbers, which have shown that prices were softening. He also believes that the Fed has more room to determine when rate cuts will start.
The EUR/USD will likely be muted on Thursday because of low volume since US markets will be closed for the July 4th holiday. After this, traders will react to the next important non-farm payrolls (NFP) data that will come out on Friday.
These numbers are expected to show that the economy added over 160k jobs in June as the unemployment rate remained at 3.9%.
The other key catalyst for the EUR/USD pair will be the upcoming ECB minutes and statements by Philip Lane, its main economist, and Elizabeth McCaul, a committee member.
EUR/USD technical analysis
The EUR/USD pair formed a triple bottom chart pattern at 1.0665 in June. On the 4H chart, it moved above this pattern’s neckline at 1.0760 as the bullish momentum continued. It has also risen above the Ichimoku cloud indicator while the 25-period and 50-period exponential moving averages have made a bullish crossover pattern.
Oscillators have also continued rising, which is a positive sign. However, the pair has also formed a shooting star pattern, which is often a sign of a bearish reversal. Therefore, it will likely drop and retest the crucial support level at 1.0760, its highest level on June 18th.
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