EUR/USD Analysis Today
The EUR/USD pair is currently experiencing a bullish trend, with daily support levels at 1.1700, 1.1650, and 1.1590, and daily resistance levels at 1.1780, 1.1860, and 1.1910. The pair has been stable above the 1.1700 resistance level, trading near its highest point since late July, and has hit a high of 1.1780 before settling around 1.1750.
Current Market Situation
This strength is being driven by overall U.S. dollar weakness and cautious positioning ahead of a busy week. In France, Prime Minister François Bayrou is facing a no-confidence vote on Monday that he is widely expected to lose, which could force President Emmanuel Macron to appoint his fifth prime minister in less than two years. Later in the week, the European Central Bank meets on Thursday, with policymakers expected to keep interest rates unchanged for the second consecutive meeting.
Impact of Upcoming Events
The ECB is considering the impact of continued trade uncertainty and the potential repercussions of proposed US tariffs, while inflation has remained at target for the third consecutive month. Across the Atlantic, investors are focusing on this week’s US inflation report after weak labor market data last week reinforced the case for a Federal Reserve interest rate cut in September, with markets now pricing in the possibility of a larger-than-usual move.
Trading Signals
There are two potential trading signals for the EUR/USD pair:
- Buy: Buy EUR/USD from the 1.1640 support level with a target of 1.1820 and a stop-loss at 1.1580.
- Sell: Sell EUR/USD from the 1.1810 resistance level with a target of 1.1600 and a stop-loss at 1.1880.
Technical Analysis
Technically, the strong performance on Friday and Monday leaves the EUR/USD pair deviating from its nine-day exponential moving average, which could lead to a slight rebound in a market that won’t see any major news until mid-week and the release of US Producer Price Index (PPI) inflation figures. The gains have also pushed the exchange rate to the top of a recent range, specifically at 1.1735, which is the 78.6% Fibonacci retracement level of the July decline.
Forecast and Outlook
According to currency trading experts, the euro should regain some of its recent strength before a potential rally. The EUR/USD pair appears to be in an uptrend at the start of the week, and analysts expect this rise to continue. However, the strong gains on Friday and the positive start on Monday suggest the pair may be overextended, and a near-term pullback for consolidation would not be surprising.
Trading Advice
Traders are advised to be cautious when trading EUR/USD until there is a reaction to the U.S. inflation data and the ECB’s announcement. It is possible that a selling strategy could ultimately be the best option. The key question is whether this neutrality will turn into a deeper decline that reinforces range trading, or whether a higher breakout will occur, allowing a target of the July 24 high of 1.1788.
Conclusion
In conclusion, the EUR/USD pair is currently experiencing a bullish trend, driven by overall U.S. dollar weakness and cautious positioning ahead of a busy week. The pair is expected to continue its uptrend, but a near-term pullback for consolidation is possible. Traders should be cautious when trading EUR/USD and wait for a reaction to the U.S. inflation data and the ECB’s announcement before making any decisions. The European Central Bank is likely to keep interest rates unchanged, which will contribute to the stabilization of short-term European interest rates and support the euro. However, the US dollar is also a strong candidate, as the Federal Reserve is likely to cut interest rates by 25 basis points next month, with additional 50 basis point cuts planned for the rest of the year.
