Bearish Flag Patterns Slowly Forms

There is a likelihood that the pair will have a bearish breakout as bears target the key support at 1.0500. 

Bearish View

• Sell the EUR/USD and set a take-profit at 1.0450.
• Add a stop-loss at 1.0625.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0600 and add a take-profit at 1.0650.
• Add a stop-loss at 1.0500.

The EUR/USD is stuck close to the lowest level this year as investors focused on the interest rate decision by the Federal Reserve and the average US jobs data. The pair is trading at 1.0545, which is slightly above last week’s low of 1.0467.

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Fed and NFP Data

The EUR/USD pair was in a tight range last week as investors reflected on the mixed events that happened last week. In the first place, data by Markit and the Institute of Supply Management (ISM) showed that the US and EU manufacturing and services sectors were cooling down as inflation continues.

The biggest event last week was the interest rate decision on Wednesday. In its decision, the bank decided to deliver its biggest interest rate hike in more than 20 years. It also hinted that it will continue hiking interest rates in the remaining meetings in a bid to counter the soaring inflation. Precisely, it noted that the neutral rate will be at 3%.

The EUR/USD pair also reacted to the latest American jobs data. The economy added 428k jobs in April while the unemployment rate moved to 3.6%. At the same time, wages held steady above 5% as the labor shortage continued rising.

In response to these jobs numbers, the bond and stock markets continued their sell-off. The 10-year bond yield, which moves inversely to prices, rose to a high of 3.14% while the 30-year rose to 3.2%. The Dow Jones and the Nasdaq 100 fell by more than 0.30%.

The pair will next react to important data from the United States. On Wednesday, the US will publish the latest consumer price index (CPI). Economists expect the data to show that inflation by 8.1% while core CPI rose by 6.1%. These numbers will provide signs that the American inflation has started peaking.

EUR/USD Forecast

The EUR/USD pair continued struggling last week as the market reflected on the latest jobs data and the FOMC decision. On the four-hour chart, the pair has formed a bearish flag pattern and moved below the 25-day and 50-day moving averages. The pair has also moved between the lower and middle lines of the Bollinger Bands.

Therefore, there is a likelihood that the pair will have a bearish breakout as bears target the key support at 1.0500. A move above the key resistance at 1.0600 will invalidate the bearish view.