Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1325.
Add a stop-loss at 1.1550.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1550.
Add a stop-loss at 1.1325.
The EUR/USD exchange rate was flat on Thursday as traders reacted mildly to the latest Federal Reserve minutes. It was trading at 1.1423, inside its recent range, as traders waited for the upcoming European Central Bank (ECB) minutes and statements from some key Fed officials.
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ECB Minutes and FedSpeak
The EUR/USD pair wavered after the Federal Reserve published minutes of the last meeting. These minutes showed that officials were divided about the future of interest rates, with policymakers entertaining scenarios in either direction.
Some officials saw a scenario where inflation falls after the end of the US-Iran conflict, allowing the bank to cut interest rates. On the other hand, some members maintained that inflation has remained above the 2% target rate, pushing the bank to either leave rates unchanged or even hike this year.
The next key EUR/USD news will come from Europe, where the European Central Bank will publish minutes of the last meeting. Unlike the Fed, the Christine Lagarde-led bank decided to hike interest rates by 0.25% to combat inflation. These minutes will provide hints on what to expect later this year.
The pair will react to statements by New York Fed’s John Williams and Dallas’ Lorie Logan, who will share their views on the economy and what to expect from the bank. The US will also publish the latest existing home sales and initial jobless claims data.
Most importantly, the pair will be in focus as the US and Iran start fighting. The US and Iran launched new strikes overnight, pushing crude oil prices higher. Brent and WTI crude oil prices jumped to $80 and $75, respectively. If the war intensifies, it means that the Fed and ECB may hike interest rates this year.
EUR/USD Technical Analysis
The EUR/USD pair has formed an ascending channel in the past few weeks. This channel formed after the pair fell sharply, a sign that it has formed a bearish flag pattern, a common continuation sign.
The pair has dropped below the 50-day Exponential Moving Average (EMA) and the Ichimoku Cloud indicator. Also, the Relative Strength Index (RSI) has continued falling.
Therefore, the pair will likely have a bearish breakout, potentially to the year-to-date low of 1.1323. The bearish outlook will become invalid if it jumps above the key resistance at 1.1473.