Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1500.
Add a stop-loss at 1.1750.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1750.
Add a stop-loss at 1.1500.
The EUR/USD exchange rate remained in the red on Monday ahead of the reopening of the US markets after the Memorial Day weekend. It retreated to 1.1645 as focus shifted to the upcoming US consumer confidence and housing data. It has pulled back by nearly 2% from its highest point in April.
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US Consumer Confidence Report Ahead
The EUR/USD pair remained on edge, even as the US and Iran moved closer to a deal to reopen the Strait of Hormuz. Hopes of a deal rose on Saturday when President Donald Trump sent a Truth Social post saying that the two countries were close to an agreement.
Trump has likely realized that the only way to reopen the Strait will be a negotiated approach. For one, his Gulf allies like Saudi Arabia and Qatar have warned him that any attacks will lead to a dire response from the Iranians, which will make the energy market worse.
The hopes of a deal between the US and Iran pushed crude oil prices and US and European bond yields lower. Lower energy prices may reduce the inflation threat that has existed in the past few months. It would also reduce the possibility that the Federal Reserve will hike interest rates this year.
The focus among most analysts will be on the Iranian issue. The key macro data to watch will be the US consumer confidence report by the Conference Board. Economists expect the report to show that confidence dropped from 92.8 in April to 96 in May.
This report is watched closely because of the important role that consumers play in the economy, where their spending is its biggest part. A drop in confidence may lead to weaker spending, which affects its growth. The US will also publish the latest house price index report.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has been in a downward trend in the past few weeks, moving from a high of 1.1850 in April to 1.1600 today. It has retreated below the important support level at 1.1660, its lowest point on April 29.
The pair has dropped below the 50-day Exponential Moving Average, a sign that bears have prevailed. This may point to more downside, potentially to the psychological point at 1.1500.
However, the Average Directional Index (ADX) has dropped to 18.8, its lowest level since March 2nd. Therefore, this may point to a rebound as investors embrace a risk-on sentiment.
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