Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1200.
Add a stop-loss at 1.1450.
Timeline: 1-2 days.
Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1450.
Add a stop-loss at 1.1200.
The EUR/USD pair retreated to 1.1378 on Thursday after a report showed that European’s inflation was easing. It also fell after Kevin Warsh’s first statement after the recent Federal Reserve interest rate decision. Focus now shifts to the upcoming US non-farm payrolls (NFP) data.
US NFP Data and Warsh’s Statement
The EUR/USD pair dropped a bit after a report showed that Europe’s inflation eased a bit in June as energy prices dropped. The headline Consumer Price Index (CPI) dropped by 0.1% from a month earlier. This led to an annual increase of 2.8%, lower than the median estimate of 3.0% and the previous month’s 3.2%. Core inflation fell from 2.6% to 2.4%.
These numbers mean that the bloc’s inflation rate will move to the European Central Bank’s target of 2.0% in the coming months, especially if energy prices remain under pressure for long. As a result, the bank will not hike interest rates again this year.
The EUR/USD pair reacted to some relatively weaker US macro data. A report by ADP showed that the economy created 98k jobs in June, weaker than the expected 118k and the previous month’s 122k. Another report by the ISM showed that the manufacturing PMI dropped to 53.3 from the previous month’s 54.0.
In a statement at an ECB forum in Portugal, Kevin Warsh insisted that the bank will continue to fight inflation. His statement appeared to suggest that he will maintain a hawkish tone later this year since inflation remains above the Federal Reserve’s 2.0% target.
Warsh also praised the Supreme Court for singling the Fed and ensuring that it remained being independent. He said this a few days after the court ruled that the president cannot fire Fed officials.
Looking ahead, the US will publish the latest non-farm payrolls (NFP) data later today. Economists expect the report to reveal that the economy created over 114k jobs in June as the jobless rate remained unchanged at 4.3%.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair formed a death cross pattern on June 23rd as the 50-day and 200-day moving averages crossed each other. This pattern is normally one of the most common bearish signs in technical analysis.
The pair has also formed a break-and-retest pattern by retesting the important resistance at 1.1415, its lowest swing in March this year. Retesting that level confirmed the bearish outlook.
Therefore, the path of the least resistance for the pair is bearish, with the next key target being at 1.1200.
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