Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0680.
- Add a stop-loss at 1.0765.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0735 and a take-profit at 1.0800.
- Add a stop-loss at 1.0.680.
The EUR/USD pair was flat on Tuesday as the market remained focused on European inflation data and the upcoming Federal Reserve interest rate decision. The pair was trading at 1.0730, higher than this month’s low of 1.0600.
European inflation and Fed decision
The EUR/USD exchange rate will be in the spotlight this week as traders react to several important economic events. The first of this event will be the upcoming European flash inflation numbers for April.
Economists expect the report to show that the headline Consumer Price Index (CPI) remained at 2.4% in April. Core CPI is expected to have dropped from 2.9% to 2.6% during the month.
On Monday, a report from Ireland showed that the country’s inflation retreated to 1.6% in April. Reports from Germany and Spain revealed that their headline CPI figures came in at 2.2% and 3.3%, respectively.
While these numbers are important, they will likely not change the outlook for the European Central Bank (ECB), which is expected to start cutting interest rates in June this year. What is unclear is the number of ECB rate cuts this year.
The EUR/USD pair will also react to the upcoming US consumer confidence report by the Conference Board. Economists polled by Reuters believe that the consumer confidence dropped from 104.7 in March to 104 in April.
Consumer confidence is an important economic data because of the crucial role that consumers plays in the economy. Their spending is the biggest part of the American economy.
The report will come out a few days after the US published weak GDP data. According to the BEA, the economy expanded by 1.6% in Q1 after growing by 3.4% in Q4.
It will also come a day before the Federal Reserve publishes its interest rate decision. The bank is not expected to hike rates this time. Instead, the committee will provide more information about when it starts to cut rates.
EUR/USD technical analysis
The EUR/USD pair has made a strong recovery in the past few days. It has risen from this month’s low of 1.0600 to a high of 1.0725. On the 4H chart, the pair has formed a rising wedge pattern, which is nearing its confluence zone.
The pair has moved above the 50-period and 25-period moving averages. Also, the Relative Strength Index (RSI) has formed a falling channel pattern. Therefore, the pair will likely remain in this range on Tuesday and then have a bearish breakout, possibly after the Fed decision.
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