Bearish Perspective
- Consider selling EUR/USD pairs and aim for a take profit at 1.1550.
- Set a stop loss at 1.1750.
- Expected timeline: 1-2 days.
Strong Positive Outlook
- Buy the EUR/USD pair with a take profit set at 1.1750.
- Place a stop loss at 1.1550.
The EUR/USD pair is hovering as traders await upcoming US inflation data, influencing Federal Reserve interest rates. On Monday morning, it traded at 1.1640, up 2.15% from a monthly low of 1.1395.
US Inflation and Federal Reserve Concerns
The fluctuations in the EUR/USD pair reflect market focus on a significant US inflation report scheduled for Tuesday. This report will shed light on the impact of Donald Trump’s tariffs on inflation.
Economists anticipate that inflation will show a gradual increase in July, with expectations of the CPI rising from 2.7% in June to 2.8%. Core inflation is also expected to rise from 2.9% in June to 3.0%.
Analysts predict that inflation may continue to climb, especially after Trump confirmed new tariffs affecting multiple countries. For instance, he has imposed a 50% tariff on goods from India, which exports over $81 billion to the US.
These inflation figures come on the heels of disappointing employment data from the US, revealing that only 73,000 jobs were created in July. This number might even be revised downward, given the US averaged just 35,000 job creations in May and June.
Thus, any spike in inflation could complicate the Fed’s interest rate plans. Many analysts are cautiously optimistic about the bank announcing its first rate cut in September, as hinted by officials like Christopher Waller and Michelle Bowman.
No significant macroeconomic data from Europe is anticipated in the next few days, apart from potential inflation updates for Italian consumers. This data is expected to remain steady at 1.7% for July.
EUR/USD Technical Insights
The EUR/USD exchange rate rebounded after reaching a low of 1.1395 on August 1st, climbing to a high of 1.1700 just last week as hopes for Fed interest rate cuts strengthened.
The pair exceeded key resistance, marking a top swing at 1.1572 in April. The MACD indicator surpassed the 50- and 100-day exponential moving averages, yet it remains at the zero line.
Currently, EUR/USD is presenting a small Doji Candlestick pattern, possibly signaling a reversal to 1.1500. Movement beyond the top of the doji at 1.1700 may indicate more profit opportunities.
