Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.1070.
- Timeline: 1 day.
Bullish View
- Set a buy-stop at 1.1035 and a take-profit at 1.1125.
- Add a stop-loss at 1.0870.
The EUR/USD pair retreated in the overnight session ahead of the upcoming US retail sales and the Federal Reserve decision. It dropped to a low of 1.0940, which was about 1.65% below the highest level last week.
US Retail Sales and FOMC Decision
The two main catalysts for the EUR/USD will be the upcoming US retail sales data and the Fed decision. Analysts expect the data to show that retail sales rose by 0.4% in February after rising by 3.8% in the previous month.
At the same time, they expect that the core retail sales that exclude the volatile food and energy products declined from 3.3% in January to 0.9%. This decline will likely be because of the rising cost of products.
The US will also publish the latest import and export price index data. Economists expect that export prices rose to 1.6% while import prices rose to 1.5%.
The next major catalyst will be the upcoming interest rate decision. Analysts expect that the Federal Reserve will start hiking interest rates for the first time since 2018.
The rate hike will be necessary to curb the rising inflation. Data published by the Bureau of Labor Statistics (BLS) showed that the country’s inflation rose to 7.9% in February, which was the highest level in over 40 years. The core CPI also rose by 6.4%, which was the highest point in decades.
In recent congressional testimony, Jerome Powell hinted that the Fed will implement a 0.25% interest rate hike. Still, some analysts expect that the bank could deliver a 0.50% rate hike since his statement came before the bank.
The biggest challenge the Fed faces is on how to hike interest rates without hurting the economic recovery.
EUR/USD Forecast
The four-hour chart shows that the EUR/USD has been in a strong bearish trend in the past few days. It has moved slightly below the key resistance level at 1.1123, which was the highest level last week. It has also dropped below the 25-day and 50-day moving averages while the MACD has moved below the neutral level.
A closer look also reveals that it has formed a head and shoulders (H&S) pattern. Therefore, there is a likelihood that the pair will keep falling as bears target the next support at 1.0800.
