The rally in the EUR/USD appears to be overdone and I expect a retrace. I want to short at 1.1740 with a stop loss at 1.1850 and a profit target of 1.1550.
EUR/USD 240 min Chart - EUR/USD is Higher
Greenback in Control
The EUR/USD managed to bounce last week and the thanks needs to go out the Fed and in particular its boss Jerome Powell. Much of the attention was on Jackson Hole and Powell’s speech. And the major takeaway was the fact that the pace of interest rate hikes in the US isn’t as urgent as many had thought.
That left a dovish tone weighing on the USD which helped the EUR/USD rally.
The jump was also thanks to US President Trump who continues to have a crack at the Fed for raising rates and pushing the USD higher. In his opinion this hurts the US economy and in particular the USA’s position on trade.
The major data point to watch this week will be US GDP. We are looking at strong growth of 4.0% which is just a touch lower than the previous reading. If we see a strong print, then the USD might well be in for a turnaround.
Key Economic Data
In terms of the EUR directly, clearly the key is CPI due out on Friday from the Eurozone. There is little to suggest that inflation is where the ECB wants it to be at this point and it is the major issue weighing on the EUR/USD.
If we beat 2.1%, then I suspect we will get a big jump higher in the EUR/USD. The target range is 2-3% so we are at the low end of the scale at the moment.
The EUR/USD has got a clear top of 1.1750, which I think will be very hard to crack. If price trades up towards this level and we see some selling interest, then I would have no issue getting short.
To the downside we might very well pullback to around the 1.1550 level which is now the downside target. Below 1.1300, the EUR/USD will see significant selling pressure.
EUR/USD - Key Levels
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