Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1700.
Add a stop-loss at 1.1490.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1490.
Add a stop-loss at 1.1700.
The EUR/USD pair rose to the highest level since June 15 after the US published a weak nonfarm payrolls (NFP) report. It soared to 1.1580, modestly higher than last month’s low of 1.1355.
US to Publish Consumer Inflation Report This Week
The EUR/USD pair rose after the Bureau of Labor Statistics (BLS) released the July nonfarm payrolls (NFP) report, which pushed the US dollar lower across the board. The US Dollar Index (DXY) dropped to $99.43, its lowest level since June 17 this year. It has dropped by 2% from its highest point in July this year.
The report revealed that the economy lost over 23k jobs in July after adding 20k in June. In its previous report, the BLS noted that the economy added 57k jobs. The report showed that the private payrolls grew by 30k jobs, while manufacturing rose by 5k. Government payrolls dropped by 53k during the month.
These numbers mean that the US economy is not growing as fast as Trump keep saying. Indeed, most of the country’s growth is coming from the technology industry, where big tech companies like Meta Platforms, Microsoft, and Amazon are spending billions of dollars in building their data centers.
The next crucial catalyst for the EUR/USD pair will be the upcoming US consumer inflation report that comes out on Wednesday. Economists expect the report to show that the headline and core inflation softened a bit last month.
Inflation has remained above the 2% target of the Federal Reserve in the last five years. As a result, the Fed is under pressure to deliver a clear outlook of what to expect this year. Some analysts expect the bank to hike, while others see it leaving them unchanged.
The EUR/USD pair will also react to the evolving situation in the Middle East, where Iran has put in place conditions for reopening the Strait of Hormuz.
EUR/USD Technical Analysis
The daily chart shows that the EUR/USD pair has crawled back in the past few weeks, moving from a low of 1.1355 on July 28 to 1.1560. It formed a double-bottom pattern and has already moved above the neckline of 1.1481, its highest level on July 15.
The pair is now in the process of forming a bullish flag pattern, which normally leads to a continuation. It has also jumped above the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has moved above the neutral level.
Therefore, the pair will likely have a bullish breakout, potentially to the psychological level of 1.1700.
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