Bullish View
- Buy the EUR/USD pair and set a take-profit at 1.0500.
- Add a stop-loss at 1.0350.
- Timeline: 1-2 days.
Bearish View
- Sell the EUR/USD pair and set a take-profit at 1.0350.
- Add a stop-loss at 1.0500.
The EUR/USD exchange rate was flat and hovering near its highest level since December 30th. It moved slightly above the psychological point at 1.0400, up by 2.40% from its lowest point this month as the US dollar index retreated.
The EUR/USD pair rose as the US dollar index (DXY) dropped from the year-to-date high of $110 to $107.8. This price action also happened as US bond yields stabilized, with the 10-year fell to 4.60% and the 30-year moved to 4.82%.
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The pair has also bounced back as investors anticipate the upcoming Federal Reserve and European Central Bank (ECB) decisions. The Fed will deliver its interest rate decision on Wednesday, while the ECB will conclude its meeting on Thursday.
Economists polled by Reuters expect the ECB to slash interest rates by 0.25% from 3.0% to 2.75%. The bank is working to engineer a recovery as some countries in the bloc remains under pressure. The most affected ones are Germany and France, the two biggest economies in the bloc.
On the other hand, the Federal Reserve is expected to maintain interest rates steady in that meeting. The bank is concerned about inflation, which has remained significantly above the 2.0% target. This month's data showed that the headline consumer price index (CPI) rose from 2.7% to 2.9%, while the core CPI moved from 3.3% to 3.2%.
The next key EUR/USD data to watch will be the upcoming initial and continuing jobless claims data. Donald Trump will also talk and possibly deliver some policy decisions.
EUR/USD technical analysis
The four-hour chart shows that the EUR/USD pair bottomed at 1.0178 on January 13. It has moved to the third phase of the Elliot Wave approach, which is usually the longest.
The pair has formed an inverse head and shoulders pattern, another popular bullsh reversal point. It has moved above the Ichimoku cloud and the 50-period moving average, while the Percentage Price Index (PPI) has continued rising.
Therefore, the pair will likely keep rising as bulls target the crucial resistance level at 1.0630, its highest swing on December 6. The stop-loss of this trade is at 1.0340, its lowest level on Monday.
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