Bullish view
Buy the EUR/USD pair and set a take-profit at 1.1620.
Add a stop-loss at 1.1480.
Timeline: 1-2 days.
Bearish view
Sell the EUR/USD pair and set a take-profit at 1.1480.
Add a stop-loss at 1.1480.
The EUR/USD pair pulled back after the US published strong manufacturing PMI numbers a few days after the Federal Reserve delivered its interest rate decision. It retreated to 1.1515, down modestly from the intraday high of 1.1557.
EUR/USD Drops After Strong US PMI Data
The US dollar jumped after the latest manufacturing PMI reports, which showed that the sector continued expanding in July. A report by S&P Global showed that the manufacturing PMI rose to 53.9 in July, higher than the expected 53.8.
Another report by the Institute of Supply Management (ISM) showed that the PMI jumped to 55.6, higher than the 54 that analysts were expecting. These numbers mean that the manufacturing sector is doing relatively well since a PMI reading of 50 and above is a sign that a sector is growing.
These numbers came a few days after the Federal Reserve delivered its interest rate decision. As most analysts were expecting, the bank left interest rates unchanged between 3.50% and 3.75%. Officials were relatively divided on whether they will hike rates later this year.
The euro is also reacting to reports that the US sold euros in its rescue for the Japanese yen last week. This selling will likely continue, especially if the yen resumes its recent downtrend.
There will be no major macro data from the US and Europe today. As a result, traders will focus on the evolving situation in the Middle East, where the US and Iran have paused their attacks.
The main macro event to watch this week will be the upcoming US nonfarm payrolls (NFP) data on Friday. Economists expect the upcoming report to show that the economy added over 87k jobs in July after adding 57k in the previous month.
EUR/USD Technical Analysis
The EUR/USD pair has bounced back in the past few days, moving from 1.1355 last week to a high of 1.1557. On the daily chart, it formed a double-bottom pattern with a neckline of 1.1483, its highest level on July 15. The pair has also moved above the 50-day Exponential Moving Average (EMA).
Also, the two lines of the MACD indicator have continued rising and are about to cross the zero line. Therefore, the pair will likely retest the neckline of 1.1483 and then resume the uptrend. If this happens, it may rebound to the next key resistance at 1.1620.
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