Strong Outlook
- Buy the EUR/USD pair, aiming for a target of 1.1900.
- Set a stop-loss at 1.1650.
- Timeframe: 1-2 days.
Bearish Outlook
- Sell EUR/USD pairs with a target of 1.1650.
- Set a stop-loss at 1900.
The EUR/USD exchange rate continues to hover around previous levels in anticipation of the European Central Bank’s (ECB) decision. There’s a growing sense of optimism regarding a potential trade agreement between the US and the European Union.
With the ECB’s meeting approaching, the EUR/USD rate has seen fluctuations. Economists are hopeful that this time, interest rate cuts will be put on hold as they assess the repercussions of earlier cuts on inflation and economic growth.
This meeting coincides with ongoing discussions about a trade deal between the EU and the US following several months of negotiations. Reports suggest that a deal could establish a 15% tariff on most imports.
EU member states have indicated a readiness to accept these duties, especially once a specified quota is met, while tariffs on steel and aluminum could reach 50%. These arrangements might help mitigate the chances of a prolonged trade war as the US’s timeline approaches.
Moreover, the US government has maintained substantial tariffs on imports in various agreements made recently. For instance, a recent deal introduced a 15% tariff on all Japanese goods, maintaining similar rates on items from countries like Indonesia and the UK.
Another key factor influencing the EUR/USD rate is the upcoming manufacturing and services PMI data from the US and the EU. Analysts anticipate that European manufacturing PMI will rise to around 50.8, with services expected to inch up to 50.7.
For the US, the manufacturing and services PMI is projected at 52.6 and 53, respectively, signaling a steady economy. Additional data is expected soon regarding first-time unemployment claims and new home sales.
EUR/USD Technical Analysis
Daily charts indicate a robust rebound for the EUR/USD exchange rate this week, occurring after the formation of a descending channel—a characteristic of a bullish flag pattern. Traders have been closely monitoring this movement since the beginning of the year, particularly with the ECB’s decision on the horizon.
The pair has recently exceeded the 50 and 100-day exponential moving averages, suggesting that bullish momentum is gaining traction. Furthermore, the relative strength index (RSI) shows an upward trend, indicating improving momentum. Thus, the most likely scenario involves continued upward movement, with the next target being 1.1900.
