Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.100.
- Add a stop-loss at 1.0850.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0900 and a take-profit at 1.0800.
- Add a stop-loss at 1.1015.
The EUR/USD exchange rate rose for six straight days, reaching its highest level since March 14th after more dovish statements from Fed officials. The pair was trading at 1.0950, much higher than this month’s low of 1.0670.
Dovish Fed statements
Several Fed officials have made dovish statements in the past few days. On Monday, Jerome Powell confirmed that the Fed would be comfortable cutting interest rates even before inflation drops to the 2% target.
Powell noted that the Fed was now more concerned about the labor market than inflation. That’s because the unemployment rate has trended upward in the past few months. It has risen from last year’s low of 3.5% to 4.1% and the trend may continue.
Other Fed officials have confirmed that the Fed was happy about inflation trends and that it will consider cutting rates this year. Christopher Waller, a Fed governor and John Williams of New York Fed, signaled that rate cuts will start soon.
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Economists expect the bank to cut interest rates as soon as in September. By then, it will have received the July jobs and inflation numbers and assessed the trend.
The main EUR/USD news on Thursday will be the upcoming European Central Bank (ECB) decision. This meeting comes a day after Eurostat published the latest consumer inflation numbers.
The data showed that the bloc’s consumer price index slowed from 2.6% in May to 2.5% in June. Core inflation remained at 2.9% YoY and 0.4% MoM during the month.
Therefore, the bank will likely hold interest rates steady and point to at least one more cut later this year. In recent statements, Christine Lagarde noted that she was comfortable with more cuts if inflation continued falling.
EUR/USD technical analysis
The EUR/USD pair has continued rising this week as odds of a dovish Federal Reserve rose. It flipped the important resistance point at 1.0915, its highest swing on June 4th.
The pair has moved to the upper side of the Bollinger Bands, a popular bullish sign. It has also risen above the 50-day Exponential Moving Average (EMA) while the Money Flow Index (MFI) is approaching the overbought point of 80.
Therefore, the pair will likely continue rising ahead and after the ECB decision. If this happens, the next point to watch will be at 1.1000. However, the pair will likely have volatility after the decision.
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