Bearish View
- Sell the EUR/USD and set a take-profit at 1.0975.
- Add a stop-loss at 1.1100.
- Timeline: 1 day.
Bullish View
- Set a buy-stop at 1.1080 and a take-profit at 1.1150.
- Add a stop-loss at 1.100.
The EUR/USD pair remained under pressure on Monday morning as investors reflected on the latest American non-farm payrolls (NFP) and the ongoing crisis in Ukraine. The pair is trading at 1.1050, which is about 1.22% below the highest point last week.
Hawkish Fed Expected
A key theme in the market has been on the Federal Reserve and the need to be more hawkish. A case for more aggressive rate hikes happened last week when the US published the latest NFP data. According to the Bureau of Labot Statistics, the US added over 431k jobs in March after it added over 750k in the previous month. Most industries, especially those in the hospitality sector, led the growth.
Other numbers in the report were also positive. For example, according to the BLS, the unemployment rate declined from 3.8% in February to 3.6% in March. This was its lowest level it has been since the pandemic started.
Wages and participation growth also continued rising as the tightening continued. Early during the week, the BLS said that the number of vacancies in the economy remained above 11 million while the number of initial jobless claims fell.
Therefore, with inflation rising quicker than expected, analysts believe that the Federal Reserve will embrace a more hawkish tone in the next meeting. Some analysts expect that the next rate hike will be about 0.50%. Indeed, Fed officials have also sounded optmimistic that they will deliver a 0.50% hike.
In a statement to the Financial Times during the weekend, Fed’s Mary Daly said that she was in support of a 50 basis point hike. She said that a case for 50 bps, barring any negative surprise had grown among her colleagues. She now believes that the neutral policy rate to be between 2.3% and 2.5%, meaning that the bank will need several more 50 basis point hikes.
EUR/USD Forecast
The EUR/USD pair retreated last week as investors focused on the EU gas crisis and the strong numbers from the United States. On the four-hour chart, the pair managed to move below the 38.2% Fibonacci retracement level.
The pair also moved below the upper side of the ascending purple channel and the important support level at 1.1120, which was the lowest point on January 28th. It also moved below the 25-day moving average. Therefore, it will likely keep falling as bears target the lower side of the channel at 1.0980.
