Bearish View
- Set a sell-stop at 1.2160 (today’s low)
- Add a take-profit at 1.2118 (23.6% retracement)
- Set a stop-loss at 1.2240.
Bullish View
- Set a buy-stop at 1.2240 and a take-profit at 1.2300.
- Add a stop-loss at 1.2170.
The EUR/USD retreated after it rose to the highest point this year as the US dollar strengthened broadly. It is trading at 1.2180, which is 0.50% below the highest point on Friday. The US dollar index, on the other hand, rose by more than 0.15%.
Inflation Concerns
On Friday, data by Markit showed that the European and American economies recovery accelerated in May as the countries reopened. In the Eurozone, the Manufacturing and Services PMIs increased to 62.8 and 55.1, respectively. This was better than the expected increase to 62.5 and 52.3. In the United States, the Composite PMI rose to 68.1 from the previous month’s 63.5. This appended as the Services PMI rose to 70.1 and the Manufacturing PMI rose to 61.5.
These numbers reflect the overall impact of the ongoing vaccination drive and the fact that many developed countries have seen fewer coronavirus infections recently. Most importantly, they reflect the fact that many countries have started to allow restaurants to open and do business. This growth will likely continue in the near term.
On Friday, the US also published the relatively weak existing home sales numbers. The data showed that the overall existing sales declined by 2.7% in April after they fell by 3.7% in the previous month. Precisely, the sales declined from more than 6 million to 5.85 million.
Later this week, the most important reading from the US will be the personal consumption expenditure (PCE) that will be published by the Bureau of Economic Analysis on Friday. This is the inflation number that the Federal Reserve pays close attention to. Analysts expect it to increase by 3.5% year-on-year, the biggest jump since 2008. They also see the Core PCE Index rising by 2.9% year on year. These numbers will come two weeks after the US published the strong Consumer Price Index data.
EUR/USD Technical Forecast
On Friday, the EUR/USD rose to 1.2240, which was slightly below the year-to-date high of 1.2245. The pair retreated today and reached a low of 1.2161, which was along the ascending trendline that connects the lowest levels since May 13. The 25-day and 15-day exponential moving averages (EMA) have made a bearish crossover while the price is also forming a bearish flag pattern. It has also formed a double-top pattern that is usually a bearish sign. Therefore, the pair may keep falling as bears target the 23.6% Fibonacci retracement level at 1.2118.