Bullish view

• Buy the EUR/USD pair and set a take-profit at 1.100.
• Add a stop-loss at 1.0800.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 1.0885 and a take-profit at 1.0800.
• Add a stop-loss at 1.100.

(Click on image to enlarge)

The EUR/USD exchange rate continued its strong rally this week after the Federal Reserve chair delivered a modestly dovish statement. It has risen for four straight days and moved to the highest point since March 21st.
 

US retail sales data ahead

The EUR/USD pair rallied after the Federal Reserve Chair welcomed last week’s inflation data. He noted that the past three inflation numbers were positive and raised the confidence that they would hit the 2% target later this year.

Powell also highlighted the risks in the labor market, which has softened recently. Data released earlier this month revealed that the country’s unemployment rate rose slightly to 4.1% in June, its highest point since 2021.

Therefore, the cooling job market and the falling inflation means that the Federal Reserve may start cutting interest rates as soon as in September this year.

The next key catalyst for the EUR/USD pair will be the upcoming US retail sales numbers, which will give more information about the health of the consumer.

Economists polled by Reuters expect the data to show that the headline retail sales dropped by 0.2% in June after growing by 0.1% in May. The core retail sales, which excludes the volatile food and energy products, is expected to rise by 0.2%.

Weaker retail sales will likely raise confidence that the Fed will start cutting interest rates soon. The bank will likely signal that it will cut rates in September during the upcoming Jackson Hole Symposium in Wyoming.

The EUR/USD pair will next react to the upcoming European Central Bank (ECB) decision scheduled on Thursday. Economists expect the bank will leave interest rates unchanged in this meeting. It will also signal that it will deliver at least two more cuts this year.
 

EUR/USD technical analysis

The EUR/USD pair has continued rising in the past few days. It has crossed the 25-day and 50-day moving averages.

The exchange rate tested the important resistance point at 1.0917, its highest point on June 4th. It has also moved to the upper side of the harmonic XABCD pattern.

The Relative Strength Index (RSI) has risen and is approaching the overbought level while the price is slightly above the 50% retracement point.

Therefore, the pair will likely continue rising as buyers target the next key resistance point at 1.100, its highest swing in November 2023.

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