Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1233 (R3).
- Set a take-profit at 1.1095.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1095 (R1).
- Add a stop-loss at 1.1230.
The EUR/USD surge accelerated after the latest Federal Reserve minutes pointed to a potential interest rate cut in September. It is in its second consecutive week of gains and has moved to 1.1165, its highest level since December last year.
The minutes showed that officials deliberated rate cuts in the July 31st meeting. Most of them concluded that the bank would consider cutting rates if the US continued publishing weak economic numbers.
Recent data have been mixed. Retail sales were relatively strong in August, meaning that the consumer was doing well.
However, more data like the manufacturing and industrial production were weaker-than-expected in July. More data showed that the unemployment rate rose to 4.3% in July, the highest point since 2021. And a revised document showed that the non-farm payrolls released in the 12 months to May were down by over 818,000.
Therefore, with inflation falling, the Fed will likely go ahead with a 0.25% or a 0.50% rate cut in the September meeting.
The EUR/USD currency pair will likely react mildly to the upcoming European and US flash manufacturing and services PMI numbers. While these numbers are important, they will not have a major impact on the Fed and the European Central Bank.
EUR/USD weekly chart analysis
The weekly chart shows that the EUR/USD pair has been in a strong uptrend in the past few weeks. It rose to a high of 1.1165 and crossed the important resistance point at 1.1138, its highest swing on December 25 and the upper side of the ascending triangle pattern.
The pair is approaching the 61.8% Fibonacci Retracement point and has moved above the 50-weekly moving average. It has also moved above the Woodie pivot point.
Therefore, the pair will likely continue rising as buyers target the important point at 1.1273, the highest swing on July 17 and the 61.8% retracement point.
EUR/USD 4H analysis
The EUR/USD pair continued its strong rally this week as this month’s momentum gained steam. On the 4H chart, the momentum indicator pointed upwards, meaning that bulls are in control.
The pair crossed the second resistance point of the Woodie pivot at 1.1140. It remains above the ascending trendline that connects the highest swing since July 12. Therefore, the path of the least resistance for the EUR/USD exchange rate is bullish, with the next target being the third Woodie resistance level at 1.1233.
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