Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1300.
- Add a stop-loss at 1.1630.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1630.
- Add a stop-loss at 1.1300.
The EUR/USD exchange rate remained in a tight range on Thursday after the Federal Reserve delivered its interest rate decision. It dropped from a high of 1.1631 last week to the current 1.1512.
Federal Reserve interest rate decision
The EUR/USD pair moved sideways after the Federal Reserve interest rate decision. In a statement, the bank left interest rates unchanged between 4.25% and 4.50% for the fourth meeting in a row.
Most of the Federal Reserve’s officials signaled that the bank will cut rates two times this year. Economists anticipate the bank will deliver its interest rate in its meeting in September.
The Fed’s officials hinted that the economy will grow by 1.4% in 2025, much lower than last year. It expects the unemployment rate to rise from the current 4.2% to 4.5% by the end of the year.
Additionally, the headline consumer inflation is expected to rise from the current 2.4% in May to 3%, higher than the bank’s target of 2.0%. Inflation will rise because of Donald Trump’s tariffs and the ongoing crisis in the Middle East.
The crisis in the Middle East, which could escalate, has led to a sharp increase of crude oil, with Brent and West Texas Intermediate (WTI) rising above $70.
The EUR/USD exchange rate also wavered after Eurostat published the latest European inflation report. Data showed that the headline consumer price index softened from April’s 2.2% to 1.9% in May. The core CPI, which excludes the volatile food and energy prices moved from 2.7% to 2.3%.
Looking ahead, the next key catalyst for the EUR/USD pair will be the upcoming speech by Christine Lagarde, the head of the European Central Bank.
EUR/USD technical analysis
The EUR/USD exchange rate retreated from a high of 1.1631 to the current 1.1500. It moved below the important support at 1.1573, its highest point on April 21.
The pair has remained above the 50-day and 100-day Exponential Moving Averages (EMA). While this is a bullish factor, the pair formed a double-top pattern whose neckline is at 1.1062, its lowest point on May 12.
Therefore, the pair will likely continue falling as sellers target the 50-day moving average at 1.1300. A move above the resistance at 1.1630 will invalidate the bearish view.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.
