Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0700.
- Add a stop-loss at 1.0810.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0810.
- Add a stop-loss at 1.0700.
The EUR/USD consolidation continued on Wednesday morning in a low-volume environment. It remained at the psychologically-important support level at 1.0750, a few points below last Friday’s high of 1.0810.
Consolidation continues
The EUR/USD pair retreated slightly after a report showed that the German economy remained under pressure in March. According to the statistics agency, the country’s factory orders dropped by 0.4% in March after contracting by 0.8% in the previous month.
A separate report released last week showed that the manufacturing PMI rose slightly to 42.5 in April. While this was a small increase, it is still below 50, signaling that the sector is contracting.
On the positive side, the services sector has continued doing well as the PMI has remained above 50 for months. The country’s exports rose by 0.9% in March after contracting by 1.6% in February. Imports rose by 0.3%, bringing the trade surplus to over 22.3 billion euros.
While these European economic numbers are important, they are not having a major impact on the euro. That’s because most analysts expect that the ECB will start cutting interest rates in its June meeting. Only a major event will prevent the bank from cutting rates.
The other important event was a statement by Neel Kashkari, the head of Minneapolis Fed. Unlike the ECB, which is expected to slash, Kashkari warned that the Fed will leave rates where they are for an extended period since inflation is still high.
The challenge for the Fed is that the US has moved into stagflation, which is characterized by high inflation and weak economic growth. Recent data revealed that the headline inflation remained above the Fed’s target of 2.0%. The economy expanded by a meager 1.6% in Q1, missing analysts estimates.
EUR/USD technical analysis
The EUR/USD pair’s attempt to retest last Friday’s high of 1.0810 but found a strong resistance at 1.0788. On the 4H chart, the pair retested the crucial support at 1.0750, the Woodie pivot point and its highest swing on April 26th.
The pair has remained slightly above the 50-period moving average, which is a positive sign. Also, Elder’s Force Index has moved to the neutral point of zero. This is an important indicator that uses an asset’s price and volume to assess the power behind an asset’s move.
Therefore, a break below the Woodie pivot point at 1.0747 will point to more downside, with the next point to watch being at 1.0700. The stop-loss of this forecast is at 1.0800.
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