Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1700.
- Add a stop-loss at 1.1500.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair an set a take-profit at 1.1500.
- Add a stop-loss at 1.1700.
The EUR/USD exchange rate rallied to its highest point since November 2021 as the US dollar index (DXY) retreated. It rose to a high of 1.1643, up by 14% from its lowest level this year.
US dollar index retreats
The EUR/USD pair rallied as the US dollar index (DXY) plunged to $97, its lowest level since April 22 as geopolitical risks eased, leading to a sharp decline in crude oil prices. Brent, the global benchmark, dropped to $66.85, while West Texas Intermediate (WTI) fell to $65.
Falling crude oil prices has led to rising odds that inflation will moderate in the coming months. This decline happened after Donald Trump announced a truce between Iran and Israel.
Before this truce, there was a risk that the US and Israel would attack Iranian oil terminals. There was also a risk that Iran would block the Strait of Hormuz, where over 20% of the world’s oil passes.
The EUR/USD pair also jumped as market participants reacted to a testimony by Jerome Powell, the Federal Reserve Governor. His statement mirrored what he said when the bank made its interest rate decision last week.
Powell maintains that the bank will leave interest rates unchanged for a while as it embraces a wait-and-see approach. He wants to see the impact of Donald Trump’s tariffs on inflation before cutting. Most notably, he hinted that the bank may start cutting rates in September.
The EUR/USD pair also pulled back after the US published weak consumer confidence data. In a report, Conference Board said that the country’s consumer confidence dropped by 5.4 points in June to 93.
The next key catalyst for the pair will be the upcoming US new home sales data, which will provide hints on the housing market.
EUR/USD technical analysis
The daily chart shows that the EUR/USD pair has been in a strong uptrend in the past few months. It has moved above the key resistance level at 1.1568, the highest swing on April 21. Moving above that level was notable as it invalidated the double-top pattern.
The pair has moved above the key level at 1.1200, the highest swing in August and September last year. It also remains above all moving averages.
Therefore, the EUR/USD pair will likely continue rising as bulls target the next resistance level at 1.1700.
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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.
