Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.1031.
- Add a stop-loss at 1.0845.
- Trade timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.0870 and a take-profit at 1.0790.
- Add a stop-loss at 1.0950.
The EUR/USD pair rebound took a breather during the American session after a hawkish statement by Loretta Mester. It also pulled back even after a series of weak economic numbers from the United States. The pair dropped to a low of 1.0900, which was lower than this week’s high of 1.0974.
Hawkish Loretta Mester's statement
The main catalyst for the EUR/USD pullback was a statement by Cleveland Fed’s Loretta Mester. In an interview with Bloomberg, Mester said that she supported more rate increases in the next few meeting. She attributed this to the fact that America’s inflation remained significantly above the Fed’s target of 2.0%. Therefore, she believes that rates should remain above 5% for a while.
The inflation picture has been complicated by the actions of the OPEC+ cartel. On Sunday, the members caught most people off-guard when they decided to slash production by more than 1.7 million barrels. As a result, Brent and West Texas Intermediate (WTI) have jumped to $85 and $80, respectively. This will translate to higher gasoline prices and inflation.
The EUR/USD pulled back after mixed economic data from the US and Europe. On Wednesday, data from Germany showed that factory orders increased by 4.8% in February from the previous 0.5%. Additional data revealed that Europe’s services PMI rose from 52.7 in February to 55.0 in March.
In the US, data showed that the economy was weakening. According to ADP, the nonfarm employment change dropped to 145k in March after rising to 261k in the previous month. Economists were expecting the figure to come in at 200k.
Additional data showed that the services sector is not doing well as the ISM non-manufacturing index dropped to 55.1.
EUR/USD technical analysis
The 4H chart shows that the EUR/USD pair has been in a bullish trend in the past few days. This rebound has been supported by the 25-period and 50-period moving averages. Also, the pair is forming a cup and handle pattern whose upper part is at 1.1031, the highest point since February 1.
The MACD remains above the neutral point. Therefore, this pair will likely resume the bullish trend toward the non-farm payrolls (NFP) numbers scheduled for Friday. If this happens, the next level to watch will be at 1.1031, the highest point on February 1.
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