Bearish View
- Sell the EUR/USD and add a take-profit at 1.2050.
- Add a stop-loss at 1.2150.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.2120 and a take-profit at 1.2200.
- Add a stop-loss at 1.2050.
The EUR/USD price was little changed in early trading as investors started to refocus on the Federal Reserve after the impressive inflation data published last week. The pair is trading at the psychological level of 1.2100, which is about 1.35% below the highest level in May.
FOMC Decision Next
Recent economic numbers from the United States have been relatively strong. Earlier this month, data showed that the economy’s unemployment rate declined to 5.8% in May as the labor market continued to tighten. Last week, numbers revealed that the headline Consumer Price Index (CPI) rose to a near 13-year high of 5.0%. Core CPI, which excludes the volatile food and energy products, rose to the highest level since 1992.
Therefore, after such strong numbers, focus will be on how the Federal Reserve will react in its meeting this week. Analysts still expect the bank will leave interest rates and quantitative easing policies unchanged. Nonetheless, they will focus on Jerome Powell’s tone on future tightening. Precisely, they will look for the term “transitory” that the Fed has used before to describe the current state of the American economy.
The decision will come a few days after the European Central Bank (ECB) published its decision. In it, the bank decided to leave interest rates and quantitative easing unchanged. The bank also committed to accelerating its asset purchases program.
The EUR/USD will today react mildly to the latest Eurozone industrial production data. Economists expect the data to show that production rose from 0.1% in March to 0.4% in April. On a year-on-year basis, they see it rising from 10.9% to 37.9%. The YoY figure will be strong because of last year’s low base. In addition to the Fed decision, the pair will react to the latest US retail sales and housing starts data.
EUR/USD Technical Analysis
On Friday, the EUR/USD declined sharply and settled at the psychological level of 1.2100, which was the lowest it has been since May 14. It is still oscillating at the current range. Further, the 25-day and 15-day exponential moving averages have formed a bearish crossover. It has also declined below the 23.6% Fibonacci retracement level, which is a sign that bears are prevailing. Therefore, the outlook of the pair is bearish, with the next key level to watch being the 38.2% retracement at 1.2050.
