Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1850.
Add a stop-loss at 1.1600.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1600.
Add a stop-loss at 1.1850.
The EUR/USD exchange rate retreated slightly after the US published the latest consumer inflation report, which largely met expectations. It it was trading at 1.1685 on Monday morning, a few points below last week’s high of 1.1740.
US Inflation Jumped Amid US-Iran War
The EUR/USD pair rose as the greenback eased after last Friday’s consumer inflation report came in line with expectations. It then pulled back slightly on Monday after President Trump announced a blockade of oil leaving the Gulf region.
A report by the Bureau of Labor Statistics (BLS) showed that the headline Consumer Price Index (CPI) rose from 2.4% in February to 3.3% in March, while the core inflation rose from 2.4% to 2.7%.
Another report showed that consumer sentiment continued dropping in April, reaching its lowest level on record as gasoline prices jumped by $1 to $4 in March. Crude oil prices have remained at an elevated level even as the US held their first talks in Pakistan.
The pair will react to the ongoing developments in the Middle East, where the US and Iran are engaged in a fragile ceasefire. The two sides held talks in Pakistan, which failed to produce a positive outcome. As a result, Trump threatened of a return to fighting and an oil blockade, which will stop ships coming in or out from the Strait of Hormuz. Crude oil prices jumped, with Brent reaching a high of $103.
The only major report to watch this week will be the upcoming European consumer inflation report on Thursday, with economists expecting the report to come in at 2.5% from the previous 1.9%.
Europe is more exposed to the soaring crude oil and natural gas prices because the bloc imports most of its energy from the Middle East after it placed sanctions on Russian energy at the start of the war. The pair will also react to statements from key European Central Bank (ECB) officials, including Christine Lagarde and Philip Lane.
EUR/USD Technical Analysis
The EUR/USD pair bottomed at 1.1412 on March 9 and then rebounded to 1.1725, its highest point since March 2nd. It has now risen above the 50-day Exponential Moving Average (EMA).
The pair has also moved slightly above the important resistance level at 1.1640, its highest point on March 23. This price was the neckline of the double-bottom pattern, a common bullish reversal sign in technical analysis.
The pair is about to flip the Supertrend indicator from red to green, while the Relative Strength Index (RSI) has just crossed the neutral point at 50 and is still pointing upwards.
Therefore, the pair will likely resume the uptrend as bulls target the key psychological level at 1.1850. The alternative scenario is where the pair drops and moves below the key support level at 1.1640.