Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1572.
- Add a stop-loss at 1.1200.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1200.
- Add a stop-loss at 1.1572.
The EUR/USD exchange rate rose even after Donald Trump threatened additional tariffs on all European goods entering the US. It jumped to a high of 1.1365, its highest swing since May 7, and 2.73% from its lowest level this month.
Trade and key economic data ahead
The EUR/USD pair continued its recovery after Trump threatened that he would impose a 50% tariff on goods coming from the European Union to the United States starting from July, 7.
Such a move would escalate the already worsening trade relations between the two regions, which handle goods and services worth over $1.6 trillion a year.
Trump accuses the EU of having unfair tariff and non-tariff barrier on US goods. He cites the large lawsuits that the block places on American companies like Apple, Google, and Facebook.
He also points to the value-added tax (VAT) even though that contentious sales tax is applied to products from all countries, including local locals.
The EU has already come up with a package to retaliate on US tariffs. Its retaliations will focus on industries like agricultural and manufacturing, including tariffs on Boeing. Ryanair, Boeing’s biggest customer has warned that it would cancel its $33 billion order if the tariffs on Boeing go in place.
The EUR/USD pair rose because market participants hope that Trump is using the threat of tariffs as a negotiation tactic.
There will be several important data points to watch this week. The Eurostat will publish the latest industrial and consumer confidence from Europe. On the same day, the Conference Board will publish its confidence report from the United States.
The other top catalyst will be the FOMC minutes on Wednesday, the second reading of the US GDP data on Thursday, and the personal consumption expenditure (PCE) report on Friday.
EUR/USD technical analysis
The daily chart shows that the EUR/USD pair bottomed at 1.1067 and then resumed the uptrend to 1.1365. It has moved above the 50-day and 25-day Exponential Moving Averages (EMA).
The pair has rebounded because it has been forming a cup-and-handle pattern, a popular bullish reversal pattern. It is now forming the handle section. Also, the Relative Strength Index (RSI) and Stochastic Oscillator have continue rising, a sign of growing momentum.
Therefore, the pair will likely continue rising as bulls target the next key resistance level at 1.1572, the highest swing this month.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.