Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0895.
- Add a stop-loss at 1.1035.
- Timeline: 1-2 days.
Bullish View
- Set a buy stop at 1.1045 and a take-profit at 1.1100.
- Add a stop-loss at 1.0945.
The EUR/USD pair remained under pressure on Monday morning as the crisis in Ukraine continued. The pair dropped to a low of 1.0985, which was slightly below this month’s high of 1.1137.
Muted Activities
The past few weeks have been a bit busy for the financial market. The European Central Bank (ECB) delivered its decision, in which it decided to leave interest rates unchanged. Its main shift was to lower the size of its asset purchase program.
The other main event was from the Federal Reserve. In its monetary policy meeting, the bank decided to hike interest rate for the first time since 2018. It also hinted that it will increase interest rates in the remaining six meetings of the year.
And in notes last week, analysts at Citigroup and Bank of America warned that the bank could deliver three consecutive rate hkes of 0.50%. Higher interest rates aim to slow inflation by making it attractive for people and save more money instead of spending.
The common theme in the meetings by the Fed and the ECB was that higher interest rates will not ameliorate the high inflation situation. The banks see inflation rising because of the ongoing crisis in Ukraine.
Economic data in the past few weeks have been mixed as well. For example, in the United States, the unemployment rate dropped to 3.8% while retail sales declined sharply in February. In Europe, the latest manufacturing and services PMIs were strong even as the European business confidence declined sharply.
In the US, consumer confidence has fallen to the lowest level in about a decade because of the rising inflation.
There will be no major economic data from the US and EU today. Therefore, the pair’s key driver will be the ongoing crisis in Ukraine.
EUR/USD Forecast
The EUR/USD pair had a relatively calm week last week as investors reflected on the statements by Jerome Powell. It is trading at 1.0985, which is below last week’s high of 1.1040. It is slightly above the 23.6% Fibonacci retracement level. It has moved slightly 25-period and 15-period moving averages while the MACD has moved below the neutral level.
Therefore, the pair will likely have a bearish breakout as bears test the next key support level at 1.0900. This view will likely be invalidated if the price moves above the key resistance at 1.1045.
