Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0350.
- Add a stop-loss at 1.0500.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.0480 and a take-profit at 1.0540.
- Add a stop-loss at 1.0380.
The EUR/USD declined sharply as the ongoing euro sell-off gathered momentum. It dropped to a low of 1.0445, which was the lowest level since June 16th. This price was about 1.5% below the highest point this week.
Euro Sell-Off Accelerated
The euro continued falling across the board. For example, the EUR/CHF price crashed below the parity level for the first time since March this year.
This performance is mostly because of the difficult place that the European Central Bank (ECB) finds itself in. Unlike most central banks, it did not hike interest rates this month. Instead, the committee decided to wind down its asset purchases program. But a few days later, it held an emergency meeting because of the widening spread between safe and risky government bonds.
The ECB also hinted that it will start hiking interest rates in July. Analysts now expect that the bank will hike by either 0.25% or 0.50%. Still, there are concerns that high rates in the euro area will lead to another debt crisis.
The EUR/USD also after Germany published the latest consumer inflation data. Numbers by Destatis revealed that inflation dropped unexpectedly in June because of government incentives. The headline CPI retreated from 8.7% in May to 8.2% in June. On the other hand, inflation in Spain jumped to an all-time high of 10%.
It also declined after the hawkish statement by Jerome Powell. Speaking at a forum organized by the ECB, Powell reiterated that the Fed will continue hiking rates in the coming months. He also noted that the bank had accepted a higher recession risk in a bid to combat inflation.
The next key data to watch will be the upcoming US PCE data. Economists expect the Fed’s favorite inflation gauge to show that prices remained at elevated levels in May.
EUR/USD Forecast
The EUR/USD pair continued falling because of the broader dollar strength and euro weakness. It dropped to a low of 1.0435, which is slightly below June 17th low of 1.0448. The pair moved below the 25-day and 50-day moving averages.
The pair also declined below the first support level of the standard pivot point while the Average Directional Index (ADX) is tilting upwards. Therefore, the pair will likely keep falling as sellers target the third support at 1.0350.
