Bearish view

• Sell the EUR/USD pair and set a take-profit at 1.0850.
• Add a stop-loss at 1.0900.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.0890 and a take-profit at 1.0915.
• Add a stop-loss at 1.0850.

(Click on image to enlarge)

The EUR/USD pair was little changed on Wednesday morning as attention remained on the upcoming European Central Bank (ECB) decision and the latest US nonfarm payrolls (NFP) data. It was trading at 1.0880, its highest swing in over 10 weeks.
 

ECB decision and NFP data

The EUR/USD pair will see elevated volatility in the next three trading days amid key events from the US and Europe. The US has already published weak job vacancies data, which showed that demand for workers tumbled to the lowest level since 2021.

ADP will next release its closely-watched nonfarm payrolls (NFP) data on Wednesday followed by the official jobs figures on Friday. These are important numbers because they form part of the Fed’s dual mandate.

They will come out as other leading indicators showed that the US economy is slowing. Last week’s GDP report revealed that the economy expanded by just 1.3% in the first quarter, a big reversal from Q4’s growth rate of 3.4%.

A weak jobs report will increase the odds of a Fed rate cut coming in the coming months. In a recent note, analysts at Standard Chartered raised the odds that the Fed will slash interest rates by 0.25% as soon as in the July meeting.

The other important catalyst for the EUR/USD pair will come out on Thursday when the European Central Bank will deliver its interest rate decision. ECB officials have already telegraphed that the bank will slash interest rates in this meeting.

As a result, the rate cut itself will likely not lead to more volatility. Instead, the focus will be on the bank’s guidance on the number of rate cuts to expect. A sign that the bank will deliver more cuts will point to a weaker euro in the near term.
 

EUR/USD technical analysis

The EUR/USD exchange rate peaked at 1.0915 on Monday and then suffered a harsh reversal as traders positioned for the ECB rate cut. On the 4H chart, it has crashed below the key support level at 1.0895, its highest swing on May 16th.

The pair retested the first support of Andrew’s pitchfork tool and has remained above the 25-period moving average. There are signs that it has formed a double-top chart pattern at 1.0895. In technical analysis, this is one of the most bearish signs in the market.

Therefore, the pair’s outlook is neutral for now. A drop below the first support of the pitchfork tool will point to more downside as sellers target the first pivot point at 1.0845. On the other hand, a retest of this week’s highest point cannot be ruled out and will be confirmed if it moves above the resistance at 1.0895.

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