Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.0675.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0725 and a take-profit at 1.0670.
- Add a stop-loss at 1.0800.
The EUR/USD exchange rate stabilized as traders waited for the upcoming US consumer confidence and housing numbers. It was trading at 1.0735, a few points above last Friday’s low of 1.0670.
Consumer confidence data
The EUR/USD pair has been under pressure in the past few weeks as the European Central Bank (ECB) and the Federal Reserve diverged on monetary policy.
In its recent meeting, the ECB decided to cut interest rates by 0.25% since inflation has moved near the 2% target. However, data released last week revealed that the country’s consumer price index (CPI) rose to 2.6%, meaning that the ECB will be patient when considering the next rate cut.
The Fed, on the other hand, left rates unchanged and sounded a bit hawkish. In its meeting, the bank estimated that it would deliver one rate cut this year if inflation continues dropping and nears the 2% target.
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Looking ahead, the important economic release to watch on Tuesday will be the US consumer confidence by the Conference Board. Economists expect the report to show that consumer confidence dropped from 102 in May to 100.2 in June.
This is an important report because of the role that consumers play in the economy since they are the biggest components. Highly confident consumers tend to spend more, boosting the economy.
The other important EUR/USD news will be the latest US house price index (HPI). Economists expect the data to show that the HPI rose from 0.1% in March to 0.5% in April. On a YoY basis, the HPI is expected to come in at 6.8%, an increase from the previous month’s 6.7%.
The EUR/USD will also react mildly to the latest Spanish GDP data. Estimates are that the economy expanded by 2.4% in the first quarter. While important, this data will not have a pronounced impact on the pair.
EUR/USD technical analysis
The EUR/USD exchange rate bottomed at 1.0670, an important level since it was its lowest swing on June 14th. It has formed a double-bottom pattern, a popular bullish sign.
The pair has consolidated at the 50-period and 25-period moving averages while the Relative Strength Index (RSI) has risen above the middle line of 50. The MACD indicator has formed a bullish divergence pattern.
Therefore, the pair will likely continue rising as buyers target the double-bottom’s neckline at 1.0761. A break above that level will point to more upside, with the next level to watch being at 1.0800.
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