Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1180.
- Add a stop-loss at 1.1065.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.1100 and a take-profit at 1.1045.
- Add a stop-loss at 1.1182.
The EUR/USD strong surge accelerated as the market started to brace for a new era of easy money in Europe and the United States. It has risen for three straight days and is hovering at its highest level in almost 9 months.
The main reason for the rally is that the odds of Federal Reserve cuts have risen in the past few months. Recent data have shown that the US economy is slowing. While retail sales rose in July, other numbers have pointed to a potential downturn.
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Manufacturing and industrial production numbers came in lower than expected while the unemployment rate rose to 4.3%, its highest point in years.
On the positive side, the inflation rate has retreated for three straight months. Therefore, while inflation remains above the Fed’s target of 2.0%, the Fed believes that cutting rates will help to improve the labor market.
The euro also rose even after a series of weak economic numbers from Europe. Industrial production and manufacturing output have also dropped in the past few months. Europe has been affected by de-industrialization and weak demand from China.
There will be no economic data from the US and Europe. Instead, traders will react to the upcoming Federal Reserve minutes, which will provide more information about the last meeting and the deliberations that happened.
EUR/USD technical analysis
The EUR/USD pair continued rallying as the dollar sell-off accelerated. On the daily chart, the pair has jumped above the second resistance of the Woodie pivot point tool. The pair was also nearing the important point at 1.1138, its highest swing on December 28.
It also rose above the key point at 1.0983, its highest swing on March 8 and the upper side of the inverted head and shoulders pattern. The pair’s rally has been supported by the 50-day and 200-day moving averages, which formed a golden cross in July.
The Relative Strength Index (RSI) has moved above 50. It has been forming a symmetrical triangle pattern, which is nearing the confluence level.
Therefore, the pair will likely continue rising as bulls target the third resistance of the Woodie pivot point at 1.1182. This view will be confirmed if the pair rises above the resistance level at 1.1138, its highest level on December 28.
Before that happens, the pair may pull back as some investors start to take profits. If this happens, it will drop to the second resistance at 1.1065 and then resume the bullish trend.
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