The EUR/USD pair rose and retested the important resistance level at 1.0700, which was the highest point on 1st March.
- Buy the EUR/USD pair and set a take-profit at 1.0780.
- Add a stop-loss at 1.0635.
- Timeline: 1-2 days.
- Set a sell-stop at 1.0655 and a take-profit at 1.0500.
- Add a stop-loss at 1.0700.
The EUR/USD price rebounded to the highest point in more than two weeks as the US dollar pulled back after an extremely hawkish statement by an ECB official. It rose to a high of 1.0695, which was about 1.43% above its lowest point in February.
The EUR/USD pair rose after Robert Holzman made an extremely hawkish statement. In it, the head of the Austrian central bank said that he supported four more 0.50% interest rate hikes in a bid to fight the soaring inflation.
The ECB has already delivered several rate hikes since last year and analysts expect another 0.50% increase this month. Christine Lagarde, the head of the ECB, will deliver a statement later on Tuesday, in which she will provide more hints about monetary policy.
Data published on Monday were relatively weak. According to Eurostat, retail sales dropped by 2.3% year-on-year in January. This was a bigger decline than the median estimate of 1.8%. Another report by Sentix showed that investor confidence crashed to -11.1 in March.
Another likely reason for the strong EUR/USD performance is increased inflows from investors who are chasing strong returns in European equities. In France, the CAC 40 index jumped to a record high while other indices like DAX are nearing their all-time high.
The main catalyst for the EUR/USD pair will be the upcoming statement by Jerome Powell. In his testimony to Congress, Powell will likely talk about the state of the economy and provide more information about what the Fed will do. Traders will be watching whether he will mention deflation as he said in last month’s testimony.
The EUR/USD pair rose and retested the important resistance level at 1.0700, which was the highest point on 1st March. This rebound happened as the US dollar index pulled back from its highest point in February. It has formed a XABCD pattern, which is usually a sign of a reversal.
Also, the pair has moved above the 23.6% Fibonacci Retracement level while the 25-day and 50-day moving averages have made a bullish crossover. Therefore, the pair will likely continue rising as buyers target the important resistance point at 1.0780, which is the 50% retracement point. The stop-loss of this trade will be at 1.0650.