Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0825.
- Add a stop-loss at 1.0920.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0880 and a take-profit at 1.0935.
- Add a stop-loss at 1.0800.
The EUR/USD exchange rate wavered ahead of the upcoming European Central Bank (ECB) decision and US jobs data. It was trading at 1.0875 on Thursday, a few points below this month’s high of 1.0915.
ECB decision ahead
The European Central Bank will conclude its two-day meeting on Thursday and deliver a closely-watched interest rate decision. Officials, including Christine Lagarde and Philip Lane, have hinted that the bank will start cutting interest rates in this meeting.
The bank will justify the rate cut to the fact that inflation has moved to 2.4%, a few points above the target of 2.05. It expects that inflation will continue falling in the coming months as energy prices slump.
At the same time, the rate cut will help to supercharge the bloc’s economic recovery. Recent economic numbers have shown that the economy was starting to bounce back after going through a prolonged slowdown.
Still, many companies and households have lamented about the rising borrowing costs because of interest rates that sit at an all-time low.
If the ECB cuts, it will become the third major central bank to start moving away from high interest rates. The Bank of Canada became the first G7 bank to cut interest rates on Wednesday. Sweden’s Riksbank and Switzerland’s Swiss National Bank (SNB) have also slashed rates.
The EUR/USD pair will also react to the upcoming European economic numbers like retail sales and employment change. Economists expect the data to reveal that retail sales slumped by 0.2% in April after expanding by 0.8% in March.
The other important EUR/USD news will be Friday’s US nonfarm payrolls (NFP) data. Economists expect the data to show that the economy added over 180k jobs in May while the unemployment rate remained at 3.9%. On Wednesday, a report by ADP showed that the economy’s private sector created 152k jobs in May.
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EUR/USD Technical Analysis
The EUR/USD exchange rate remained in a consolidation phase ahead of the ECB data. It was trading at 1.0875, a few pips below the key resistance point at 1.0895, its highest swing on May 16th. It has moved to the first support of the Woodie pivot point and between the 61.8% and 78.6% retracement levels.
The pair has moved slightly above the 50-period and 25-period Exponential Moving Averages (EMA). Also, it has formed a broadening wedge chart pattern. Therefore, the pair will likely have a bearish breakout as sellers target the lower side of the wedge at 1.0825.
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