Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.0600.
- Add a stop-loss at 1.0430.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.0445 and a take-profit at 1.0385.
- Add a stop-loss at 1.0500.
The EUR/USD price retreated as the strength of the US dollar continued following last week’s Federal Reserve interest rate decision. It is trading at 1.0493, which is about 1% below the highest level last week.
US Dollar Strength
The EUR/USD pair declined after the Fed decided to continue hiking interest rates in a bid to fight inflation. The bank decided to hike interest rates by 0.75%, the highest increase in almost 30 years. The Fed is also continuing with its quantitative tightening policy.
Still, data published recently showed that the country’s economy is weakening. Building permits and housing starts continued dropping in May. Other numbers like the country’s pending and new home sales have all crashed in the past few months. This trend will likely continue as the cost of home buying continues rising. Last week, the average mortgage rate in the US jumped to a multi-year high of over 6%.
The EUR/USD is also retreating as investors react to the challenges facing the European economy. Last week, Russia decided to slash the flow of natural gas to some European countries like France and Italy. And now, Germany is making contigency measures to deal with a potential supply cut.
Therefore, there is a likelihood that consumer prices will continue rising in the coming months. Data published on Friday showed that the bloc’s consumer inflation surged to a record high of 8.1% as the cost of energy continued rising. Core inflation, which excludes the volatile food and energy prices, also kept rising.
The next key catalyst for the EUR/USD pair will be speeches by ECB officials. Members like Christine Lagarde, Chief Economist Philip Lane, and Fabio Panetta will talk on the bloc’s monetary policy. The pair will, nonetheless, have minimal movements since US markets will be closed on Monday.
EUR/USD Forecast
The EUR/USD pair is under pressure as European and American bonds continued having a sell-off. The pair has moved below the 50-day moving average and the important key resistance level at 1.0630. This level was the lowest price on June 1st. Further, it is below last Thursday’s high of 1,0600.
The pair’s Relative Strength Index (RSI) has moved slightly above the neutral point at 50. There is a possibility that it will resume the bullish trend as buyers target the key resistance at 1.0600.
