Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1215.
- Add a stop-loss at 1.1400.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1400.
- Add a stop-loss at 1.1200.
The EUR/USD exchange rate remained under pressure on Monday as investors focused on the upcoming Federal Reserve decision and the latest developments on trade. It dropped from last month’s high of 1.1575 to the psychological point at 1.1300.
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Federal Reserve decision
The EUR/USD exchange rate has pulled back in the past few days as the recent US dollar sell-off eased. The US Dollar Index (DXY), which tracks the greenback's performance against a basket of currencies, rose from a low of $98,000 last month to the current $100.
Analysts are now focusing on the upcoming Federal Reserve interest rate decision, which will set the tone for what to expect later this year. Wall Street analysts expect the bank to leave rates unchanged in this meeting.
Most of them then expect the bank to slash rates three times later this year. Goldman Sachs analysts see the bank delivering the first rate cut in its July meeting. Therefore, this week's main Fed decision will have a limited impact on the EUR/USD pair.
Instead, the pair will react to the guidance on what to expect in the coming meetings. A sign that the bank will cut rates soon will be bearish for the US dollar.
The EUR/USD pair also wavered after Donald Trump sent a mixed tariff message. He initially hinted that he will be open to a deal with countries like China, Europe, and India.
However, he also implemented a 100% tariff on movies filmed in other countries, dampening the mood among analysts.
The pair also reacted to the ongoing crude oil prices retreat after OPEC+ members voted to increase production for the second month in row. They will increase production by 411k barrels a day at a time when there are concerns about demand weakness.
EUR/USD technical analysis
The daily chart shows that the EUR/USD pair has been in a slow downtrend in the past few days as the greenback strengthened.
It has formed a small head-and-shoulders-like chart pattern, a popular bearish sign. Also, the Relative Strength Index (RSI) has moved below the overbought point, reaching a low of 56, its lowest level since April 1.
The volume has also continued falling. Therefore, the pair will likely continue falling as sellers target the key support at 1.1215, the upper side of the cup-and-handle pattern. The pair will then bounce back after retesting the support at 1.1215.
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