Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1550.
- Add a stop-loss at 1.1750.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1750.
- Add a stop-loss at 1.1550.
The EUR/USD pair remained on edge as traders waited for the upcoming US inflation data and as the odds of a Federal Reserve interest rate cut rose. It was trading at 1.1640 on Monday morning, up by 2.15% from the month-to-date low of 1.1395.
US Inflation and Federal Reserve Cut Hopes
The EUR/USD exchange rate wavered as market participants focused on the key US inflation report on Tuesday. This report will provide more information on whether Donald Trump’s tariffs are having an impact on inflation.
Economists expect the data to show that inflation continued to rise gradually in July. The main view is that the CPI rose from 2.7% in June to 2.8% in July. Core inflation is expected to move from 2.9% in June to 3.0%.
Analysts believe that inflation will continue to rise gradually now that Trump has confirmed tariffs on top countries. For example, Trump implemented a 50% tariff on all goods from India, a country that exports goods worth over $81 billion to the US.
These inflation numbers follow the US’s publication of weak jobs numbers. The data showed that the economy created just 73,000 jobs in July, a figure that will likely be revised downwards. This report also showed that the US created an average of 35,000 jobs in May and June.
Therefore, a jump in inflation will complicate the Federal Reserve’s outlook for interest cuts. Most analysts expect the bank to deliver the first cut of the year in September, as some Fed officials, such as Christopher Waller and Michele Bowman, have hinted.
There will be no major macro data from Europe in the next few days. The only one to watch will be the Italian consumer inflation. The data is expected to show that inflation remained at 1.7% in July.
EUR/USD Technical Analysis
The EUR/USD exchange rate rebounded after hitting a low of 1.1395 on August 1. It jumped to a high of 1.1700 last week as hopes of Federal Reserve interest rate cuts rose.
The pair has moved above the key resistance at 1.1572, the highest swing in April this year. It has moved above the 50-day and 100-day Exponential Moving Averages (EMA), while the MACD is stuck at the zero line.
The EUR/USD has formed a small doji candlestick pattern, pointing to a reversal to 1.1500. A move above the upper side of the doji at 1.1700 will point to more gains.
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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.