- Buy the EUR/USD pair and set a take-profit at 1.1400.
- Add a stop-loss at 1.1100.
- Timeline: 1-2 days.
- Sell the EUR/USD pair and set a take-profit at 1.1100.
- Add a stop-loss at 1.1400.
The EUR/USD exchange rate dropped to a crucial support level as the US Dollar Index (DXY) jumped after the US reached a trade deal with the UK and announced trade talks with China. It dropped to a low of 1.1215, the upper side of the cup-and-handle chart pattern on the daily chart.
The EUR/USD pair retreated ahead of China and US trade talks, which started on Saturday and ended without any announcement. These talks will continue on Sunday, and the two countries are expected to announce some relief.
However, they are not expected to reach a conclusive deal in this meeting. Instead, they will hint at more future talks. In a recent statement, Scott Bessent, who is leading the US side of talks, hinted that these talks may take at least three years to conclude.
The other key EUR/USD news will come from the United States, which will provide its inflation report on Tuesday. Economists polled by Reuters expect this report to reveal that US inflation rose slightly in April as the impact of Trump’s tariffs started to be felt.
The headline CPI is expected to come in at 0.3%, an increase from minus 0.1% in March. This figure will translate to a year-on-year increase of 2.5% from the previous 2.5%.
Core inflation, which excludes the volatile food and energy products, is expected to remain intact at 2.8%. These numbers will come a week after the Federal Reserve left interest rates unchanged and insisted that it was not in a hurry to cut interest rates.
The other key EUR/USD news will come from Europe, releasing its GDP data on Thursday. Some ECB officials like Boris Vujcic, Isabel Schnabel, and Olli Lehn have supported rate cuts by the central bank this year.
The US will also publish the latest retail sales, industrial, and manufacturing production data on Thursday.
The weekly chart shows that the EUR/USD pair has dropped in the last three consecutive weeks, moving from a high of 1.1570 to the current 1.1248. This retreat was notable as the pair retested a crucial level that was the upper side of the cup-and-handle pattern, a popular bullish continuation sign.
The pair also retested the 61.8% Fibonacci Retracement level, and remains above the 50-week moving average. Therefore, the most likely scenario is where it resumes the uptrend this week since it has retested the support at 1.1215. If this happens, it may rise to the psychological point at 1.1400.
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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.
