Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1575.
- Add a stop-loss at 1.1850.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1825.
- Add a stop-loss at 1.1575.
The EUR/USD exchange rate pulled back slightly, continuing a trend that started earlier this month when it peaked at 1.1826. It retreated to a low of 1.1720 after the Federal Reserve released minutes from its last meeting.
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US Dollar Index Rises After FOMC Minutes
The EUR/USD exchange rate declined slightly after the Federal Reserve released minutes of the last meeting. These minutes provided investors with more information about the deliberations that took place during the meeting.
Fed officials decided to leave interest rates unchanged between 4.25% and 4.50% as they remained concerned about Donald Trump’s tariffs. Some officials predicted that inflation would surge as companies adjusted their prices, while others estimated that it would be gradual.
The Fed officials now expects that there will be two interest rate cuts this year, possibly starting in September. Odds of a rate cut this year dropped sharply as investors reacted to last week’s nonfarm payrolls (NFP) data.
According to the Bureau of Labor Statistics (BLS), the economy added 147,000 jobs in June, with the unemployment rate improving to 4.1%. Odds of a rate cut would have jumped if the US released weak jobs numbers.
The relatively hawkish view of the Federal Reserve has irked Donald Trump, who called for a 300 basis point interest rate cuts. Trump believes that the Fed is putting the US at a disadvantage by leaving interest rates high for so long.
There will be no major market-moving economic data in the next two days. Instead, focus will be on next week’s consumer inflation data. A lower figure than expected will bring a July cut into play.
EUR/USD technical analysis
The EUR/USD pair has been in a strong uptrend in the past few months as the US dollar sell-off gained steam. It surged by over 15% from its lowest level in January to the highest point this year.
The pair has remained above the important support level at 1.1575, its highest level on April 21. It also remains above all moving averages. At the same time, the two lines of the MACD are about to cross each other, while the Relative Strength Index (RSI) has pointed downwards.
Therefore, the pair will likely continue falling as bears target the key support at 1.1575 and then resume the uptrend. This performance is known as a break-and-retest and is one of the most common bullish continuation signs.
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