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Recovery Fades as Bears Target 1.0700

  • Buy the EUR/USD pair and set a take-profit at 1.0900.
  • Add a stop-loss at 1.0745.
  • Timeline: 1-2 days.
  • Set a sell-stop at 1.0795 and a take-profit at 1.0700.
  • Add a stop-loss at 1.0850.

The euro and the US dollar have moved sideways as investors reflect on the latest Fed speak and the US debt crisis. The EUR/USD pair was trading at 1.0820, where it has been since Friday. This price is a few points above the lowest level this month.

The main event moving the euro, dollar, and other currencies this week is the debt ceiling issue as the June 1 deadline nears. Joe Biden and Kevin McCarthy, the house speaker, held a meeting on Monday evening. In it, they deliberated on key topics, including the proposals by the speaker.

However, like the previous meeting, the two leaders did not complete the deliberations. They committed to continue talking ahead of June 1 when the US is set to default on its obligations. Analysts and the betting market believe that the two sides will reach a deal before the deadline.

The EUR/USD also reacted to the mixed messaging from the Federal Reserve. On Friday, Jerome Powell sounded a bit dovish as he warned about the state of the economy. He singled out the performance of the banking sector, which has been going through turbulence recently. As a result, he believes that the terminal rate will be lower than expected.

Several Fed officials have supported pausing interest rate hikes in June arguing that the move will give the bank an opportunity to assess the impact of the last hikes. Others believe that inflation remains at an elevated level, meaning that the bank will need to keep hiking rates.


The key data to watch today will be the flash manufacturing and services PMI figure by S&P Global. Economists believe that the manufacturing PMI in Europe and the US remained below 50 while the services sector boomed. Eurostat will also publish the latest current account data.

The EUR/USD pair has been in a bearish trend in the past few days. This sell-off started when the pair reached a high of 1.0857 this month. It has now moved to the 50% retracement point on the 4H chart. The pair has also dropped below the 50-period exponential moving average. It has moved below the Ichimoku cloud indicator while the Awesome Oscillator has moved below the neutral point.

Therefore, the outlook of the pair is bearish, with the next key support level being at 1.0750. On the other hand, a move above the resistance at 1.0850 will signal that bears have prevailed and push it higher.

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