Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1323.
- Add a stop-loss at 1.1500.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1323.
The EUR/USD pair has remained under pressure in the past few days as the US dollar strength continued. It retreated to 1.1415 on Monday morning, down by 5.5% from its highest point this year. This performance will come to the test later this week as the US publishes key macro data like inflation and retail sales.
US Inflation and Retail Sales Data
The EUR/USD pair remained under pressure on Monday as concerns about the rising tensions between the US and Iran. The two countries exchanged fire during the weekend, with the US accusing Iran of violating the Memorandum of Understanding (MoU).
Iran responded by closing the Strait of Hormuz and targeting US sites in the region. Crude oil prices jumped on Monday morning, continuing an uptrend that started last week.
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The EUR/USD pair will be highly volatile this week as the US and Europe releases key macro data. The most important one will come out on Tuesday when the US publishes the latest consumer price index (CPI) data. Economists expect the upcoming report to show that inflation dropped dropped slightly last month.
The US will also publish the latest Producer Price Index (PPI) report on Wednesday, followed by retail sales a day after that. These numbers are important because they will provide more hints on what to expect in the next meeting.
Minutes released last week showed that officials were divided on the next monetary policy. Some committee members supported hiking interest rates later this year as inflation has remained above 2%.
Others supported cutting rates, citing the slowing economy as evidenced by the weak labor market. Data released this month showed that the economy created just 57k jobs last month, lower than expectations.
The EUR/USD pair will also react mildly to the latest EU inflation report. Historically, the inflation rate tends to have a minimal impact on the pair since Eurostat normally releases a flash estimate before that.
EUR/USD Technical Analysis
The EUR/USD pair has remained under pressure in the past few days and is trading at 1.1415 from a high of 1.1847, its highest point in April this year.
It has remained below the 50-day Exponential Moving Average (EMA). Also, it has formed a bearish flag pattern, a common continuation sign.
The Relative Strength Index (RSI) has stalled below the neutral level of 50 and is pointing downwards. Therefore, the pair will likely have a bearish breakout, potentially to the year-to-date low of 1.1323.
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