Bearish View
- Set a sell-stop at 1.1450 and a take-profit at 1.1365.
- Add a stop-loss at 1.1550.
- Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.1460 and a take-profit at 1.1525.
Add a stop-loss at 1.1400.
The EUR/USD pair continued its bullish rally as the market reacted to the latest interest rate decision by the European Central Bank (ECB) and the strong American jobs data. It is trading at 1.1450, which is slightly below last week’s high of 1.1485. The price is about 2.95% above the lowest level this year.
ECB and Jobs Data
The EUR/USD made a strong comeback last week after the ECB delivered its decision. The main decision was in line with what we have expected from the bank. It left rates unchanged and continued with its asset purchase purchases.
The situation changed during Christine Lagarde’s press conference. In it, she said that the bank will leave rates unchanged until the real interest rate remained above the target at 2%. Pressed about the issue, she refused to rule out a situation where the bank becomes more aggressive with rate hikes later this year.
The view that the ECB will start hiking rates this year was supported by the recent economic numbers. Data published recently has shown that the economy is doing well. For example, the unemployment rate dropped to the lowest level on record. Further, GDP data showed that the economy managed to grow in the fourth quarter.
The EUR/USD pair rally slowed after data by the American government showed that the labor market strengthened in the past two months. On Friday, the BLS upgraded its December jobs numbers to over 500k. It also reported that the economy added over 467k jobs in January while the unemployment rate rose slightly to 4.0%.
Meanwhile, the bond market is sending a message that the Fed will be able to hike interest rates without slowing growth. Real yields have risen sharply recently as investors expect that the growth will continue.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD pair rose to a high of 1.1482 last week. This was a notable level since it was the highest level in January this year. As a result, the pair moved above the 25-day and 50-day moving averages while the Stochastic Oscillator has moved to the overbought level. Other oscillators like the Relative Strength Index (RSI) and MACD have also continued rising.
Therefore, there is a likelihood that the pair will give back some of its last week’s gains as investors target the support at 1.1365.
