The EURUSD pair ended the previous week with a significant pullback from a new four-year high near 1.192, a correction that brought the price down to the key uptrend. This line provided strong support, halting the bearish momentum. This week, however, buyers have taken the lead, pushing quotes up to 1.18. The next target for the pair is to retest the 1.192 peak, though more prudent market players may deem it better to take profits slightly earlier, at around 1.187.
The rebound is clearly visible on the daily (D1) and four-hour (H4) charts, where bullish engulfing patterns have formed and confirmed signals for opening long positions. Moreover, the MACD indicator suggests the prevailing uptrend has the potential to persist, with a move to 1.187 appearing likely in the near term. The fact that the pair is still on a roll and is backed by the 100-day moving average cannot be overlooked, either.
In the meantime, Federal Reserve (Fed) Chairman Jerome Powell's speech yesterday received a mixed response from investors. He highlighted a key contradiction: the need for the regulator to contain inflation while the labor market weakens. Addressing these challenges requires opposing monetary policy actions. Nevertheless, the most likely scenario remains rate cuts in October and December.
More and more officials believe that the European Central Bank's (ECB) cycle of lowering borrowing costs is over. Executive Board member Piero Cipollone echoed this sentiment in a Bloomberg interview, drawing attention to the trade-off between inflation and GDP growth risks in the EU. The regulator is unlikely to change its stance before the December meeting, when updated economic forecasts are due. This implies that the fundamental picture for the euro is not expected to get much worse until then.
The following trading plan may come on-stream:
Buy EURUSD at the current price. Take profit: 1.187. Stop loss: 1.175.
This content is for informational purposes only and is not intended to be investing advice.
