Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1350.
- Add a stop-loss at 1.1100.
- Timeline: 1-2 days.
Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1100.
- Add a stop-loss at 1.1350.
The EUR/USD exchange rate retreated as the US Dollar Index (DXY) pulled back ahead of the upcoming US inflation and retail sales data. It also dropped after some key statements from leading European Central Bank (ECB) officials. It was trading at 1.1250, down from the year-to-date high of 1.1570.
US inflation and retail sales data
The EUR/USD pair pulled back after the first round of talks between the United States and China in Switzerland. President Donald Trump said that the talks had made progress, while Scott Bessent, Treasury Secretary Scott Bessent said that he would provide more details on Monday. He said that the two countries has made significant groundwork in the two-day meeting.
A deal between the two countries will be a good thing as it will help to reduce the cost of doing business in the US. It will also reduce tensions that have been going on in the market since Trump introduced his tariffs.
The other key EUR/USD news will come out on Wednesday when the US publishes its inflation data. Economists expect these numbers to reveal the impact of tariffs on consumer prices.
The headline Consumer Price Index (CPI) is expected to come in at 2.5%, a small increase from March’s 2.4%. Most economists also expect that the US inflation will keep rising, with analysts at Goldman Sachs expecting the figure to end the year at almost 4%.
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The EUR/USD pair will also react to the upcoming US retail sales data, which will provide an early signal on how consumers are reacting to Trump’s tariffs.
The pair is also reacting to the recent statements by some European Central Bank (ECB) officials. In a statement, Boris Vujcic, a governing council member, noted that the bloc’s inflation would drop to the 2% target rate later this year. In another statement, Isabel Schnabel said that the bank would maintain rates at the current level for a while.
EUR/USD technical analysis
The EUR/USD exchange rate peaked at 1.1570 in April and then retreated to a low of 1.1215 last week. Its lowest level coincided with the upper side of the cup and handle pattern, a popular bullish continuation sign.
The pair has remained above the 50-day and 25-day moving averages. It has also formed a break-and-retest pattern, which normally leads to a continuation.
Therefore, the most likely scenario is where the pair rebounds this week. If this happens, the next point to watch will be at 1.1350. A drop below that support will point to more downside, potentially to the support at 1.1100.
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