Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0918 (50% retracement point).
- Add a stop-loss at 1.0800.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0835 and a take-profit at 1.0750.
- Add a stop-loss at 1.0900.
The EUR/USD continued its slow recovery as focus shifted to the upcoming ADP jobs data and the interest rate decision by the European Central Bank (ECB). The pair spiked to a high of 1.0876 on Tuesday, its highest point since February 22nd.
ECB interest rate decision ahead
The EUR/USD pair rose after the encouraging European services and composite PMI numbers. According to S&P Global, the services PMI moved back to the expansion zone of 50.2 in February, higher than the median estimate of 50.0. The composite PMI rose to 49.2, also higher than the expected 48.9.
In France, the services PMI rose to 48.4 while in Germany, it spiked to 48.3. These numbers mean that the biggest countries in Europe are going through a slowdown.
A separate report showed that Europe’s Producer Price Index (PPI) dropped by 8.6% YoY and 0.9% MoM in January. The two were weaker than the expected drop of 8.1% and 0.1%.
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These reports will likely play a minimal role when the ECB starts its two-day monetary policy meeting on Wednesday. Most economists expect the bank will decide to leave rates unchanged and resist calls for more rate cuts since inflation is still sticky.
Meanwhile, data from ISM revealed that the US non-manufacturing PMI figure came in at 52.6 in February, lower than the median estimate of 53.0. Still, the sector’s output is growing since it was above the 50 level. Factory orders crashed by 3.8% in January.
Looking ahead, the EUR/USD pair will have several important events on Wednesday. ADP wil; publish its estimate of the country’s jobs numbers. Estimates are that the report will show that the private sector added 149k jobs.
The other important report will be the country’s JOLTs job openings, Fed’s Beige Book, and US crude oil inventories. Fed officials like Mary Daly andNeel Kashkari will also talk.
EUR/USD technical analysis
The EUR/USD pair has been in a slow uptrend in the past few days. On Tuesday, it jumped to the key resistance at 1.0876, a few points above the 38.2% Fibonacci Retracement point. The pair has remained above the 50-period moving average.
It has also formed an inverse head and shoulders pattern, a popular bullish sign. It is now nearing the neckline of this pattern at 1.0876. Therefore, the outlook for the pair is bullish, with the next target being the 50% retracement point at 1.0918.
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