Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1475.
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 1.1475.
The EUR/USD exchange rate continued the recent downward trend that started on August 20 when it peaked at 1.1711. This retreat continued on Friday when odds of a Fed rate hike jumped after Jerome Powell’s statement at the Jackson Hole Symposium.
Odds of Federal Reserve Rate Hikes Rise
Traders are betting that the Federal Reserve will hike interest rates by 25 basis points in the December meeting. Odds of this happen jumped to 65% on Polymarket and Kalshi.
This probability rose after the Federal Reserve Chair delivered a hawkish statement at the Jackson Hole Symposium. He maintained that inflation remained stubbornly high and that the Fed will need to do something.
The most recently released numbers showed that the headline and core Personal Consumption Expenditure (PCE) numbers remained above 3% in July this year. It has remained above the 2% target in the last five years.
The Fed’s challenge is that inflation has remained high even as the labor market softens. Recent data showed that the economy lost 23,000 jobs last month, while consumer confidence dropped in August.
Traders are also betting that the European Central Bank (ECB) will hike interest rates by 0.25% in the September meeting. That’s because recent inflation report showed that the bloc’s prices have remained at an elevated level.
The upcoming flash inflation report is expected to show that prices rose 3.3% in August from 2.9% in the previous month. One key reason for this is that diesel prices have soared to the highest level in years.
The EUR/USD pair will also react to the upcoming flash manufacturing and services PMI numbers, which will provide color on the state of the US and European economies.
EUR/USD Technical Analysis
The daily timeframe chart shows that the EUR/USD pair formed two shooting star candlesticks last week. These patterns are made up of a small body and long upper wick.
The pair then started falling moderately, a trend that accelerated after last week’s Jackson Hole Symposium. It has now dropped below the strong pivot reverse level of the Murrey Math Lines tool.
On the positive side, the pair remains slightly above the 50-day Exponential Moving Average, which has provided it with substantial support. Therefore, the pair will likely continue falling in the near term, potentially to the Major S/R pivot point at 1.1474, and then bounce back.
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