Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0980.
- Add a stop-loss at 1.1125.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1100.
- Add a stop-loss at 1.0980.
The EUR/USD pair continued falling ahead of Thursday’s European Central Bank (ECB) decision. The pair slipped to 1.1025, its lowest level since August 16, and 1.60% below its highest level this year.
ECB interest rate decision
The EUR/USD pair dropped ahead as the price of crude oil continued falling. Brent dropped by over 3.1% while the West Texas Intermediate (WTI) fell by 3.60% to $69 and $66, respectively.
US government bonds have also continued falling as hopes of Federal Reserve rate cuts continued falling. The 10-year yield fell to 3.63% while the 30-year and five-year dropped to 3.95% and 3.4%, respectively.
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This performance means that the Federal Reserve will start cutting interest rates in its September meeting. Jerome Powell and other Fed officials have hinted that the cut will come because of the deteriorating labor market.
Data released last week showed that the unemployment rate has remained above 4% while the number of new job openings dropped to the lowest point in over two years.
Looking ahead, the US will publish the latest consumer inflation numbers on Wednesday. While these numbers are important, they will likely not have a big impact on the Federal Reserve since it has hinted that it will start cutting interest rates later this month.
The next key catalyst for the EUR/USD pair will be the upcoming European Central Bank decision on Thursday. Analysts expect the bank to deliver another rate cut in its upcoming meeting since the bloc’s economy is slowing and inflation has moved closer to the 2% target.
EUR/USD technical analysis
The EUR/USD exchange rate peaked at 1.1200 last month as the euro continued its strong rally. Since then, it has suffered a harsh reversal as the US dollar index has risen slightly. It dropped below the key support level at 1.0980, its highest swing in March.
The pair has also remained above the 50-day Exponential Moving Average (EMA) while the two libes of the MACD formed a bearish crossover and is nearing the neutral point. Also, the Money Flow Index (MFI) has dropped to 50.
Therefore, the pair will likely continue falling as sellers target the key support at 1.0980, which also coincides with the 50-day EMA level. If this happens, it will signal that the pair has formed a break and retest pattern, which is often a continuation sign.
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