Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0700.
- Add a stop-loss at 1.100.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.100.
- Add a stop-loss at 1.0700.
The EUR/USD exchange rate surged and reached its highest level since November as the US dollar index crashed and after the latest European Central Bank (ECB) decision. It jumped to a high of 1.0890, up by 6.45% from its lowest level this year.
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US dollar index has crashed
The EUR/USD pair soared as the market predicted that the Federal Reserve will deliver more interest rate cuts than expected.
That’s because the US has published a series of weak economic numbers lately. A report by the Conference Board showed that consumer confidence dropped sharply in February as many people remained concerned about Trump’s tariffs and inflation.
Another report released last week showed that the labor market was softening, partly because of Trump’s tariffs and Elon Musk’s activity. According to ADP, the private sector created just 77k jobs in February, lower than the expected 150k.
The official NFP data revealed that the US economy created 151k jobs in February, lower than the median estimate of 160k. Further, the unemployment rate rose slightly to 4.1%, while wage growth softened.
Additionally, the Atlanta FedNow data estimates that the US economy will have a negative growth rate in Q1. It estimates that the GDP will slip by 2.4% during the quarter, erasing most of last year's activity.
These numbers mean that the Fed will likely decide to deliver at least three interest rate cuts this year, with the first one coming in May. The Fed’s guidance was for two cuts this year.
The EUR/USD pair rose after the European Central Bank (ECB) slashed interest rates on Thursday. It has now cut rates about 5 times during the cycle, and analysts expect it to maintain them at the current level for longer.
EUR/USD technical analysis
The daily chart shows that the EUR/USD exchange rate has been in a strong uptrend in the past few days, moving from the year-to-date low of 1.0177 to 1.0855. It has avoided moving back to the parity level as some analysts were expecting.
The 50-day and 100-day Weighted Moving Averages (WMA) have formed a bullish crossover, pointing to further upside. However, the pair has become highly overbought, with the Relative Strength Index (RSI) and the Stochastic RSI moving to 72 and 96, respectively.
Therefore, while the uptrend is still intact, the pair will likely retreat and retest the support at 1.0600 and resume the upward momentum.
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