Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1000.
- Add a stop-loss at 1.0850.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.0920 and a take-profit at 1.0850.
- Add a stop-loss at 1.1000.
The EUR/USD pair retreated sharply from its highest point this week as sense of calm spread in the financial market after Monday’s turmoil. It dropped from a high of 1.100 on Monday to a low of 1.0905.
The pair’s retreat coincided with the rebound of European and US equities. In the US, the Dow Jones rose by over 600 points after falling by over 1,000 points on Monday. The S&P 500 index jumped by 100 points while the Nasdaq 100 rose by 320 points.
Top Forex Brokers
Also, the CBOE volatility index slumped by over 35% while the US dollar index rose by 0.30% to $102.80. This performance happened as investors continued to price in interest rate cuts by the Federal Reserve as US recession odds rose. In a statement, Austan Goolsbee, the head of the Chicago Fed noted that the bank would fix the economy if it deteriorates further.
Other Fed officials who have talked this week like Mary Daly also hinted that the Fed would intervene if conditions worsened.
The EUR/USD pair also retreated after a set of mixed economic data from Europe. On the positive side, German factory orders rose by 3.9% in June after falling by 1.7% a year earlier. The rebound was higher than the median estimate of 0.4%.
Meanwhile, another report by Eurostat showed that the bloc’s retail sales dropped by 0.3% in June after rising by 0.5% in the previous month.
EUR/USD technical analysis
The EUR/USD pair soared to a high of 1.1000 (January 2nd high) on Monday as global risks rose. It then retreated as the US dollar bounced back. On the daily chart, the pair has dropped below the neckline of the inverse head and shoulders chart pattern, a popular bullish sign.
The pair has risen above the 50-day moving average and the ascending trendline, which connects the lowest point since October last year. Also, the Stochastic Relative Strength Index (RSI) has pointed upwards.
Therefore, with no major economic data to watch on Wednesday, the pair will likely remain in this range as traders wait for the next catalyst. The key support and resistance points to watch will be at 1.0850 and 1.1000. Later on, the EUR/USD exchange rate will bounce back because of the inverse H&S pattern.
Ready to trade our free Forex signals? Here are the top brokers in Europe to choose from.