By Crispus Nyaga
Reviewer Justin Paolini
Fact-checker Justin Paolini
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1400.
- Add a stop-loss at 1.1100.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1100.
- Add a stop-loss at 1.1400.
The EUR/USD exchange rate rose for the second day as concerns about the US economy continued. It jumped to a high of 1.1287 on Wednesday morning, up by almost 2% from its lowest point this month.
Credit rating downgrade and US tax bill
The EUR/USD pair has rallied this week as traders reflected on the recent US credit rating downgrade by Moody’s. While the news was largely expected, there are signs that investors are still concerned.
For example, US equities have erased some of the gains made earlier his month. The Dow Jones, Russell 2000, and Nasdaq 100 indices dropped by over 0.35% on Tuesday, continuing a sell-off that started last week.
In its report, Moody’s warned that the US public debt was growing at an alarming rate, as it stands at over $36.8 trillion. Analysts anticipate that the debt will keep rising unless Washington politicians slash spending and increase revenue.
The situation could worsen as Donald Trump presses for the so-called Big Beautiful Bill. This bill will increase the US budget deficit and cost over $4 trillion in the next decade.
Therefore, the EUR/USD pair has jumped as investors sell their US dollars amid concerns about its status as the world’s reserve currency.
The EUR/USD pair will also react to the upcoming ECB non-monetary policy meeting in Frankfurt. Historically, this meeting does not move the euro as policymakers rarely address the media.
The most recent statement by some ECB officials is that the bank should consider cutting rates further as trade jitters remain.
EUR/USD technical analysis
The daily chart shows that the EUR/USD pair crashed to a low of 1.1067 earlier this month as the US dollar rebounded. It them formed a harami candlestick pattern, which happens when a small bullish candle is contained within the body of a larger preceding candle.
The pair found a strong support at the 50-day Exponential Moving Average (EMA), while the Stochastic Oscillator indicator has pointed upwards and moved above the neutral point of 50.
Therefore, the pair will likely continue rising as bulls target the psychological point at 1.1400. More gains will see it rise to the year-to-date high of 1.1572. A move below the support at 1.1140 will invalidate the bullish outlook.
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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.