Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.2000.
- Add a stop-loss at 1.1765.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1765.
- Add a stop-loss at 1.2000.
The EUR/USD exchange rate remained in a tight range on Monday morning as market participants reacted to the recent macro data from the United States and their implications on the Federal Reserve. It was trading at 1.1867, a few points below this month's high of 1.1935.
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US Inflation Dropped as the Labor Market Tighted
The EUR/USD paid retreated slightly as investors reacted to the key macro data from the United States. A report released by the Bureau of Labor Statistics (BLS) showed that the economy created 130k jobs in January as the unemployment rate improved to 4.3%.
Another report showed that the country’s inflation continues falling in January. The headline Consumer Price Index dropped to 2.4% from 2.6% in the previous month. Core inflation, which excludes the volatile food and energy prices, remained unchanged at 2.5%.
If this trend continues, there is a likelihood that the Federal Reserve will deliver more interest rate cuts than expected later this year. While the Fed has hinted that it will deliver one cut this year, market participants expect that the bank will deliver two or three more cuts.
The EUR/USD pair will likely be muted this week, especially now that the US markets will be closed on Monday because of the President's Day celebrations. It will also be muted because the Fed and the European Central Bank (ECB) have already delivered their interest rate decisions this month.
Also, no major macro numbers are scheduled from the US and the European Union this week. The key data to watch this week will be the US housing starts, building permits, and pending home sales data. The only major news to watch will be the upcoming Federal Reserve minutes, which will come out on Wednesday.
EUR/USD Technical Analysis
The EUR/USD exchange rate has pulled back in the past few days, moving from a high of 1.2095 in January to the current 1.1867.
On the positive side, the pair remains above the 50-day and 100-day Exponential Moving Averages (EMA). At the same time, the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have pulled back.
It also remains inside the ascending channel. Therefore, the pair will likely have a bullish breakout, potentially to the key resistance level at 1.2000. A move below the key support level 1.1765 will invalidate the bullish outlook.