Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1500.
- Add a stop-loss at 1.1200.
- Timeline: 1-5 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1200.
- Add a stop-loss at 1.1500.
The EUR/USD pair continued its strong surge and crossed an important resistance level as concerns about the US economy continued. It has risen in the last three consecutive weeks, and is hovering at its highest level in over three years.
ECB interest rate decision and trade
The EUR/USD pair remains in a strong bull run as the market remains concerned about the US economy. There are concerns in the investment community about the health of the US dollar as the safe haven after Donald Trump’s unilateral tariffs.
Further, there are concerns that the US economy may be heading towards a recession. Recent data showed that consumer confidence has crashed in the past few weeks, a move that may affect spending. Consumer spending is the biggest part of the American economy.
Polymarket traders have placed a 65% chance of a recession in the US this year. Other analysts from companies like Citi, Bank of America, and Moody’s have also warned that a recession may happen this year.
Several Fed officials have also warned that the economy may slow this year because of Trump’s tariffs and mixed signals about tariffs.
Trump has signaled flexibility on these tariffs. Last week, he lowered levies on over 70 countries, and most recently, he exempted smartphone tariffs. Therefore, any major tariff news will impact the EUR/USD pair.
The most important catalyst for the EUR/USD pair will be the upcoming European Central Bank (ECB) interest rate decision scheduled on Thursday.
With the European facing a hostile US where it sells most of its goods, there is a likelihood that the ECB will maintain its dovish tone. Economists are pricing another 0.25% rate cut in this meeting, followed by another one in the next meeting.
EUR/USD technical analysis
The weekly chart shows that the EUR/USD pair has been in a strong bullish trend after finding a bottom at 1.0182 earlier this year. It has soared and crossed the key resistance level at 1.1226, the highest swing on September 9 and July 2023.
The pair has soared above the 50-week moving average, while the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have pointed upward. It is also hovering at the 61.8% Fibonacci Retracement level.
Therefore, the pair may first drop and retest the support at 1.1225 and then resume the uptrend. This price action is known as a break-and-retest and is a popular continuation sign. If this happens, the pair will then soar to 1.1500.
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