Bearish Perspective
Bullish Perspective
The EUR/USD exchange rate dropped to a critical support point at 1.1500 on Tuesday, as market participants awaited decision-making from the European Central Bank (ECB) and the upcoming US consumer inflation data. Since its peak in May, it has decreased over 2.6%.
ECB Interest Rate Decisions and US Inflation Data
There has been a significant downward trend in the EUR/USD pair lately. This sell-off intensified following three important job reports from the US that were released last week.
In a report published on Tuesday, the Bureau of Labor Statistics (BLS) indicated that job vacancies surged by more than 700,000 in April. Meanwhile, another report from ADP mentioned the private sector added 122,000 jobs in May, with the BLS showing a total of 172,000 new jobs that month. These figures suggest that the economy remains robust, even amidst the ongoing conflict.
Both individuals withdrew amid the escalating crisis in the Middle East, with recent hostilities between Iran and Israel. Although President Trump’s intervention temporarily halted the violence, there’s still a chance it could flare up again.
An important trigger for the EUR/USD movement is expected on Wednesday when the US releases its latest consumer inflation figures. Economists are predicting a 4.2% rise in the headline Consumer Price Index (CPI) for May, which is above the Federal Reserve’s 2.0% target. This could lead the Fed to consider a 0.25% interest rate hike this year.
The EUR/USD will also respond to the ECB’s policy decisions on Thursday. Analysts anticipate that the bank will raise interest rates by 0.25% in response to escalating inflation.
EUR/USD Technical Analysis
Recent charts indicate that the EUR/USD pair has experienced a notable decline over the past few days. It has fallen below the critical support level of 1.1578, previously the low recorded on May 21.
The pair has dipped under the 50-day exponential moving average (EMA), and both the Relative Strength Index (RSI) and Stochastic Oscillator continue to trend downwards.
Currently, it appears likely that the pair is set to decline further, potentially reaching the next psychological level at 1.1400. A rise above the significant resistance level at 1.1578 would negate this bearish outlook.
