Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.1240.
- Add a stop-loss at 1.1100.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 1.1140 and a take-profit at 1.1075.
- Add a stop-loss at 1.1240.
The EUR/USD exchange rate pulled back slightly as crude oil prices jumped to the highest point in two weeks and as the excitement about last week’s statement by Jay Powell faded. The pair retreated to 1.1165, down from last week’s high of 1.1200.
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Crude Oil Prices and German Sentiment
The EUR/USD pair retreated as the price of Brent crude jumped by over 3% to $80.3 while the West Texas Intermediate (WTI) rose to $77.40.
Crude jumped because of the rising geopolitical tensions in the Middle East after Israel launched bomb attacks in Lebanon, risking a prolonged conflict.
It also soared after news reports pointed to supply challenges from Libya, a top oil producer that exports over 1 million barrels each day. Higher oil prices could lead to more inflation and slow the pace of interest rate cuts. The greenback rises when there are more geopolitical tensions.
The EUR/USD pair also retreated after a report revealed that business confidence in Germany dropped in August. The closely watched business expectations figure dropped from 87 in July to 86.8 in Auguts while the business climate figure fell to 86.6 from the previous 87.
These numbers mean that the German economy is still slowing since they have dropped for three months in a row. Reports by the IMF and OECD predict that Germany will have one of the slowest growth rates in the G7 this year. Germany will publish the second estimate of the Q2 GDP data on Tuesday.
The EUR/USD pair also pulled back after the latest US durable goods order numbers. Orders rose by 9.9% after falling by 6.9% in the previous month. Core orders fell by 0.2% on a month-on-month basis.
The key data to watch will be the upcoming US consumer confidence report, which is expected to show that it dropped from 100.3 in July to 100.2 in August.
EUR/USD Technical Analysis
The EUR/USD exchange rate rose to a high of 1.1200 on Friday after Fed’s Jay Powell hinted that the bank would start cutting interest rates in September. That sentiment was in line with what most analysts were expecting.
The pair then retreated to 1.1160 as the rally took a breather. On the 4H chart, it remains slightly above the key support at 1.1140, its highest point in December 2023. It has also moved above the 50-period moving average
The Relative Strength Index (RSI) and the MACD indicators have all tilted downwards. Therefore, the pair will likely retest the support at 1.1140 and then resume the bullish trend as traders wait for the US personal consumption expenditure (PCE) report on Friday.
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