Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.0950.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0910 and a take-profit at 1.100.
- Add a stop-loss at 1.0850.
The EUR/USD price crawled back as investors waited for the upcoming interest rate decision by the European Central Bank (ECB). The pair rose to a high of 1.0877, which was above this week’s low of 1.0890.
ECB Interest Rate Preview
The ECB will conclude its two-day meeting on Thursday and deliver the highly anticipated interest rate decision.
The decision comes at a time when global bond yields have risen to the highest levels in a few years. It also comes after mixed economic data from Germany.
Data published by Eurostat showed that the bloc’s unemployment rate has crashed to an all-time low, signaling that the labor market is strong.
On the other hand, data shows that the Eurozone inflation has risen to the highest levels in decades. And this trend will continue the longer the crisis in Ukraine continues.
Other numbers show that the manufacturing sector is seeing an impact of supply shortages and high cost of doing business. Business and consumer sentiment has also dropped.
Therefore, analysts expect that the ECB will deliver a relatively cautious statement. The base case is that the bank will leave interest rates unchanged and then sigal that it will start moving later this year. Also, it will likely hint that it will be data-dependent when it comes to raising interest rates and implementing its QT program.
The ECB decision comes at a time when other central banks have become significantly hawkish. On Wednesday, the Canadian and New Zealand central banks delivered strong rate hikes. The Fed has also hinted that it will continue hiking rates.
The EUR/USD pair will also react to the latest US retail sales and initial jobless claims numbers. Economists expect that these numbers will show that retail sales rose by 0.6% in March while core sales rose by 1.0% even as inflation rose.
EUR/USD Forecast
The EUR/USD pair rose in the overnight session. On the three-hour chart, it is approaching the upper side of the descending channel shown in purple. It also moved slightly above the 25-period and 50-period moving averages while the MACD moved above the neutral level. It also retested the important resistance level that was the lowest level on March 11th.
Therefore, there is a likelihood that the pair will resume the bearish trend and retest the lower side of the descending channel at 1.0800.
