Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1500.
Add a stop-loss at 1.1700.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1700.
Add a stop-loss at 1.1500.
The EUR/USD pair wavered as crude oil prices and US bond yields pulled back amid hopes that the US and Iran will reach a deal in the coming weeks or months. It dropped to 1.1582, its lowest point since April 7 and then settled at 1.1625 ahead of the upcoming European and US PMI numbers.
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Trump Raises Iran Deal Hopes
The EUR/USD pair reacted mildly to the announcement by Trump that the US and Iran were close to reaching a deal to end or at least pause the war. Brent and the West Texas Intermediate (WTI) fell by over 5% in response to that, while US long and short-term government bond yields pulled back.
Trump’s statement came a few hours after Iran threatened to strike areas outside the Middle East if Trump attacked. It is unclear what the IRGC has in mind. Still, the US media has reported that Iran has substantial military capability despite the recent bombing by the US and Iran.
Still, there is a risk that Trump’s statement was aimed at the market, as Iran has not confirmed talks. He has constantly talked about Iran wanting a deal and nothing comes out of it as the two sides are too far apart. Therefore, there is a likelihood that a deal is not as close as Trump expects.
The EUR/USD pair also reacted mildly to the latest Federal Reserve minutes, which provided insights into the latest meeting. These minutes showed that some officials supported cutting interest rates later this year because of the soft economic growth. Still, two members eventually dissented, arguing that inflation remained stubbornly high.
The next key catalyst for the pair will be the upcoming US and European PMI numbers. These numbers will provide more information about the state of the respective economies. Economists expect the flash Eurozone and US composite PMIs to come in at 48.8 and 50, respectively.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has pulled back in the past few days. It formed a double-top-like pattern at 1.1795 and a neckline at 1.1657. It has now moved below this neckline, confirming the bearish outlook.
The pair has moved slightly below the 50-day moving average and is now at the Strong, Pivot, Reverse level of the Murrey Math Lines tool.
Therefore, the chart shows that the pair may continue falling in the near term. If this happens, the pair will likely drop further towards the psychological point at 1,1500. A move above the resistance at 1.1657 will invalidate the bearish outlook.