Euro Set to Retest 1.0750

The pair will likely keep rising as bulls target the key support at 1.0750.

Bullish View

  • Buy the EUR/USD and set a take-profit at 1.0750.
  • Add a stop-loss at 1.0600.
  • Timeline: 1-2 days.

Bearish View

  • Set a sell-stop at 1.0600 and a take-profit at 1.0500.
  • Add a stop-loss at 1.0700.

The EUR/USD moved sideways after the latest minutes by the Federal Reserve. The pair is trading at 1.0673, which is slightly below this week’s high of 1.0750. The next key data to watch will be US pending home sales and GDP numbers.


FOMC Minutes

The FOMC published minutes of this month’s meeting. The minutes showed that members agreed that the bank needs to continue with the 50 basis point hikes in the next few meetings in order to fight inflation. By being this aggressive, officials believe that the bank will be positioned well to assess the effects of policy firming.

Before the minutes, most investors were expecting that the bank will only deliver 50 basis point hikes in the next two meetings and then move to 20 basis points. Also, the officials noted that the bank may need to move above the neutral level of rate that will support the economic growth without causing inflation.

The FOMC minutes came a few hours after pressure mounted on the European Central Bank (ECB) to start normalizing its policies. In a statement, Charles Goodhart, a former official at the BOE warned that  ECB officials face a “very difficult” task ahead to contain inflation.

He spoke in a panel led by ECB’ Chief economist, Philip Lane. Still, there are signs that the ECB has started listening to critics. This week, Christine Lagarde wrote a lengthy blog post in which she made the case of starting rate hikes in the July meeting and then exiting negative rates in September.

The next key data that will have an impact on the EUR/USD will be the upcoming US GDP numbers that will come out in the afternoon session. Since these are the second estimates, their impact on the pair will be limited. The pair will also react to the latest US pending home sales numbers.

EUR/USD Forecast

The EUR/USD pair formed a break and retest pattern when it moved to a low of 1.0640 on Wednesday. The pair is now trading at 1.0677, which is slightly below this week’s high of 1.0750. It remains above the 25-day and 50-day moving averages.

At the same time, it has moved slightly above the 38.2% Fibonacci Retracement level. The pair has moved above the neutral level. Therefore, the pair will likely keep rising as bulls target the key support at 1.0750.


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