In the event of a downward trend
In the case of an upward trend
- Set the buy stop order at 1.0550 and the take profit order at 1.0650.
- Set the stop loss order at 1.0.480.
The EUR/USD currency pair fell sharply as investors reacted to the tight interest rate decision by the European Central Bank (ECB) and strong US inflation data. It fell to 1.0475, the lowest level since May 19.
Federal Reserve decision regarding to be issued
The US dollar was strengthening while stocks fell following data showed that US inflation is still rising. According to the Bureau of Labor Statistics (BLS), core consumer inflation rose from 8.3% to 8.6% in May. That number was above the average estimate of 8.1% and was the highest in more than 40 years.
The strong inflation data was mostly caused by higher energy and food prices. The price of most food items such as eggs, milk and meat has jumped by more than 10% in the past 12 months. At the same time, the cost of energy also jumped sharply. Over the weekend, average gasoline prices at Gass Buddy jumped to $5 for the first time ever.
These numbers came a day a week following the US reported strong job numbers. The data revealed that the country’s unemployment rate remained at 3.6% in May as the economy added more than 390,000 jobs. Participation rate remains strong.
Therefore, analysts believe that the Federal Reserve will continue to tighten monetary policy as planned in an effort to combat spiraling inflation. The Federal Open Market Committee (FOMC) will start its meeting this week and offer a 0.50% increase. Some analysts are even expecting a 0.75% rate hike.
The euro also fell once morest the US dollar as investors focused on the interest rate decision by the European Central Bank. The European Central Bank left interest rates unchanged and indicated that they will start to rise next month.
Forecast for the EUR/USD currency pair
EURUSD fell to its lowest level since May 19 following the latest consumer inflation data. It fell to 1.0475 and was able to move below the symmetrical triangle pattern shown in black. The pair also fell below the 23.6% Fibonacci retracement level. Meanwhile, it moved below the 25-day and 50-day moving averages.
Therefore, the outlook for the pair is still bearish, with the next major support level to watch at 1.0400. Movement above the resistance level 1.0550 will nullify the downside trend.
