Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1407.
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 1.1407.
The EUR/USD exchange rate rebounded after last week’s central bank decisions by the Federal Reserve and the ECB. It jumped to 1.1622 from this month's low of 1.1408.
Federal Reserve and ECB Decisions
The EUR/USD pair rose after the Federal Reserve delivered its second interest rate decision on Wednesday. In its decision, the bank left interest rates unchanged between 3.50% and 3.75% in line with what analysts were expecting.
The bank warned that inflation was still a challenge as the Iran war continued. Some analysts expect that it will jump from the current 2.4% to over 3% as energy prices and transport costs continue rising.
In a statement on Friday, United Airlines said that it will continue cutting flights, citing the rising jet fuel prices, which have jumped by over 50% since the war started. Other central banks have also boosted prices since the war started.
The European Central Bank (ECB) also left interest rates unchanged and hinted of a hike this year. Banks like JPMorgan, Morgan Stanley, and Barclays have warned that the bank may deliver three rate hikes this year as energy prices continue rising. They expect the rate hikes to happen in April, June, and July.
The bank is contending with the rising energy prices, with European gas prices continuing rising after the destruction of key energy infrastructure in the Middle East, where Europe gets most of its energy.
This week will likely be calm for the EUR/USD pair because the two central banks have already delivered their interest rate decisions. There will be no major macro data this week. As a result, focus will be on the ongoing Iran war and its impact on the economy and energy prices.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD exchange rate has rebounded in the past few days, moving from this month's low of 1.1400 to the current 1.1570. It remains slightly below the 23.6% Fibonacci Retracement level.
The pair has also remained below the 50-day Exponential Moving Average (EMA). It has also remained below the Supertrend indicator.
The pair has formed an evening star candlestick pattern, a common bearish reversal sign in technical analysis.
Therefore, the pair will likely remain under pressure in the coming days and possibly retest this month’s low of 1.1407. A move below that level will point to more downside, potentially to the 38.2% Fibonacci Retracement level at 1.1350.