Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1235.
- Add a stop-loss at 1.1100.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.1150 and a take-profit at 1.1100.
- Add a stop-loss at 1.1230.
The EUR/USD made a brief bullish breakout even as Europe faced one of its biggest energy challenges ever. The pair rose to a high of 1.1170, which was the highest point since March 1.
Europe Energy Crisis
Many EU member states like Germany rely on Russia for most of their energy. As a result, the bloc’s economy has been severely hit by the ongoing crisis as the cost of both oil and gas has risen.
The situation has been worsened by the recent announcement by Russia that it will only accept energy sales using the ruble. In a meeting this week, EU members rejected that measure, meaning that the region could be cut off from Russian energy in the coming days.
EU member states have already started preparing for the worst-case scenario. For example, Germany and Austria announced new measures that could lead to gas rationing. Germany established a committee that will analyze supply and then make necessary adjustments.
Austria, which imports 80% of its total gas from Russia, said that it would implement the first stage of its three-stage emergency contingency plan. Therefore, analysts expect that gas prices will keep rising in the coming weeks.
In a statement on Wednesday, Christine Lagarde said that she sees living costs spiral as the Ukraine war continues. She also insisted that inflation will stop rising. Still, most analysts believe that the chances for stagflation are still limited.
The next major EUR/USD catalyst will be the upcoming US non-farm payrolls data that comes on Friday. Economists expect these numbers to reveal that the economy added more than 400k jobs in March as the economy continued its recovery process. They also see the unemployment rate dropping to 3.7%. These numbers will be unlikely to change the sentiment by the Federal Reserve.
EUR/USD Forecast
The EUR/USD pair has been in a strong bullish trend in the past few days. On the 4H chart, the pair is trading at the upper side of the ascending channel shown in blue. It has also moved above the 50% Fibonacci retracement and the 50-period moving average, signaling that bulls are in control. The MACD has moved slightly above the neutral line.
Therefore, the pair will likely keep rising ahead of the upcoming US NFP data. The next key target will be at the 61.8% Fibonacci retracement level at 1.1232.
