Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1147.
- Add a stop-loss at 1.0800.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0727.
- Add a stop-loss at 1.1147.
The EUR/USD exchange rate wavered as the market reacted to the latest developments on trade between the US and other countries. It was trading at 1.0930 on Thursday morning, down from the year-to-date high of 1.1147.
Trump pauses some tariffs
The EUR/USD pair wavered after Donald Trump announced that he was pausing his Liberation Day tariffs on non-retaliating countries, including the European Union. However, he also added tariffs on Chinese goods to 125% after Beijing continued to retaliate on US tariffs.
Trump said that the pause will give the US and other countries to negotiate and potentially reach a deal on future tariffs. His goal is to have serious deals to help the US narrow its large trade deficit with other countries, especially China.
The pair also wavered after the Federal Reserve published minutes of the last meeting. These minutes showed that officials were united in leaving interest rates unchanged in the second meeting of the year.
Most of them supported leaving these rates unchanged for a while as they observe trends on inflation. The accompanying dot plot showed that these officials anticipate two interest rate cuts this year.
However, conditions have changed in the past few days, with concerns about stagflation rising. Stagflation is a situation characterized by slow economic growth and high inflation rate and is one of the toughest ones to manage.
The next important catalyst for the EUR/USD pair will come out later on Thursday when the US publishes the latest consumer inflation data. Economists expect the data to show that the headline CPI dropped from 2.8% in February to 2.6% in May, while the core figure retreated to 3.0%.
If these numbers are correct, and with the price of crude oil falling, there is a likelihood that the Fed will deliver at least three cuts this year.
EUR/USD technical analysis
The daily chart shows that the EUR/USD pair has held steady in the past few months. It jumped from a low of 1.0180 in January to a high of 1.1147 last week.
The pair has remained above the 50-day moving average, a sign that bulls are in control. Most importantly, the pair has formed a cup and handle pattern, a popular bullish continuation sign in the market.
The depth of this cup, or the distance between the upper side and the lower side is 7%. Therefore, measuring the same distance from the upper side shows the target is 1.1667. In the short-term, the target is the year-to-date high of 1.1147.
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