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Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.100.
- Add a stop-loss at 1.090.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 1.0910 and a take-profit at 1.0860.
- Add a stop-loss at 1.1025.
The EUR/USD exchange rate jumped sharply last week after the European Central Bank (ECB) and the Federal Reserve offered diverging decisions. The pair jumped to a high of 1.0962, the highest point since May 23rd. It has soared by almost 3% from the lowest point this month.
ECB and Fed divergence
The EUR/USD pair rose after the important US consumer price index (CPI) data and the latest Federal Reserve decision. Data by the Bureau of Labor Statistics showed that the country’s inflation dropped to 4.0%, the lowest point since 2021. Core inflation fell slightly to 5.3%.
The pair also reacted mildly to the interest rate decision by the Federal Reserve. In it, the bank decided to leave interest rates unchanged between 5.0% and 5.25%. It was the first time in 10 meetings that the bank left rates unchanged.
The other important mover for the EUR/USD was the interest rate decision by the European Central Bank (ECB). Unlike the Fed, the ECB decided to hike rates by 0.25%. It pushed rates to 3.5%, the highest level since 2001, and hinted that inflation will rise at a faster pace than expected.
In a statement, Christine Lagarde warned that the strong labor market risked leaving inflation above its 2% target until 2025. Analysts read the statement to mean that the bank will continue hiking interest rates in the next few meetings.
The EUR/USD pair will have a muted performance on Monday since US markets will be closed for the Juneteenth holiday. There will also be no major economic data from the US and the euro area. Looking ahead, the key data to watch this week will be US building permits, housing starts, and existing home sales.
The pair will also react to statements from Fed officials like Jerome Powell, Loretta Mester, and Tom Barkin.
EUR/USD exchange rate forecast
The EUR/USD pair has been in a strong bullish trend after bottoming at 1.0635 in May. It crossed the key resistance point at 1.0828, the highest point on May 22nd. It also flipped the important resistance at 1.0828 into support.
The EUR/USD pair moved above the 25-day and 50-day moving averages, which is a bullish sign. At the same time, the Relative Strength Index has risen and formed a rising wedge pattern. 1.1000 will be the key resistance to watch while 1.0908 will be the support on Monday.
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