Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1325.
Add a stop-loss at 1.1150.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1150.
Add a stop-loss at 1.1325.
The EUR/USD pair slumped below a crucial support level last week as the US dollar’s strength continued. It dropped to a low of 1.1215, its lowest level since May last year and down by over 6.8% from its highest point in January. This retreat lost momentum after the US published weak inflation and jobs reports.
FOMC Minutes Ahead
The EUR/USD pair’s sell-off stalled after a series of important events last week. In the energy market, diesel prices retreated after the G7 agreed to release millions of barrels of as prices jumped to a record high. If the retreat is sustained, it may help to improve the inflation situation.
The US published a softer-than-expected inflation report last week. A report by the Bureau of Economic Analysis (BEA) showed that the headline and core PCE figures were lower than expected. This weakness was because of a change in how the figure is calculated, with the BEA changing how it calculates prices for portfolio management, legal services, and software.
In response to the report, Neel Kashkari, a Fed official, insisted that the softer report did not change the view that the bank will hike rates. However, traders on Polymarket and Kalshi still believe that the Fed will not hike this year.
Another report released on Friday showed that the unemployment rate rose to 4.2% last month as the economy added just 29,000 jobs during the month. The Bureau of Labor Statistics (BLS) also decided to lower the number of jobs that were created in August this year, a sign that the labor market was softening.
The key catalysts for the EUR/USD pair will be the upcoming European and US services and composite PMI reports. These reports will provide more hints on the health of the respective economies. Most importantly, the Fed will release minutes of the last meeting on Wednesday.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has been in a steep sell-off in the past few weeks as odds of a Fed rate hike jumped. This sell-off also coincided with the rising US and European government bond yields.
The pair slumped below the crucial support level of 1.1326, its lowest level on June 24, invalidating the double-bottom pattern. This pattern is usually a popular reversal signs in technical analysis.
The most likely scenario is where the pair rebounds and retests the key resistance level of 1.1326 and then resumes the downtrend. This pattern is one of the most common continuation signs in technical analysis.
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