Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1200.
Add a stop-loss at 1.1600.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1600.
Add a stop-loss at 1.1200.
The EUR/USD exchange rate continued its strong downward trend on Monday, reaching its lowest level since August last year as focus shifted to the upcoming Federal Reserve and European Central Bank (ECB) interest rate decisions. It dropped to 1.1415, down sharply from the year-to-date high of 1.2080.
Federal Reserve and European Central Bank Decisions
The EUR/USD exchange rate continued dropping this month as the Iran war continued. This retreat happened as investors turned to the US dollar as its role as a safe-haven jumped.
The price action also happened as energy prices continued rising. Data shows that Brent and the West Texas Intermediate (WTI) held steady above $100 on Monday morning after the US attacked Kharg Island, Iran’s crude oil export hub. Iran has threatened to retaliate by bombing energy infrastructure in the region.
The next important EUR/USD news will come out on Wednesday as the Federal Reserve delivers its interest rate decision. Economists believe that the central bank will leave interest rates unchanged between 3.50% and 3.75% as it observes the ongoing war and its impact on inflation.
In a note last week, analysts at Goldman Sachs predicted that the bank will leave rates intact and then hike in December this year. Polymarket and Kalshi traders anticipate the bank to deliver one cut this year.
The EUR/USD pair will also react to the upcoming European Central Bank decision on Thursday. Like the Fed, analysts expect that the bank will leave rates unchanged.
The bank is facing substantial pressure as its work to bring inflation down gets undone. While inflation remains below 2%, analysts believe that the soaring energy prices will push it higher in the coming months. It will also affect economic growth and boost the unemployment rate. For example, Volkswagen announced that it would cut 50,000 jobs.
EUR/USD Technical Analysis
The EUR/USD exchange rate has slumped, moving from the year-to-date high of 1.2080 in February to the current 1.1415. It has dropped to the lowest level since August last year.
The pair has dropped below the ascending trendline that connects the lowest swings since August. It has dropped below the 50-day and 200-day Exponential Moving Averages (EMA) and is now nearing forming a death cross pattern.
The Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) indicators have continued falling in the past few weeks and are now at their lowest levels in over a year.
Therefore, the pair will likely continue falling as sellers target the next key support level at 1.1200. A move above the 200-day moving average at 1.1585 will invalidate the bullish outlook.