Invest in EURUSD up to 1.17650

To get a handle on where the EURUSD pair might be heading, let's unpack the key drivers shaping today's landscape.

Right now, we find ourselves in a peculiar spot. Due to the ongoing conflict in the Middle East, energy prices in the European Union have shot up once again, fueling what analysts call "imported inflation". The eurozone economy is far more hooked on foreign commodities than the United States—which is known to be a major oil and gas producer on its own. These sky-high crude costs burden regional factories with brutal expenses, weighing down the euro and capping its upside, even with the European Central Bank's (ECB) rates staying elevated. 

This leaves President Christine Lagarde trapped between a rock and a hard place. She is forced to keep a hawkish foot on the brake to contain inflation, all while the eurozone GDP limps along on shaky legs. Ironically, such a tough stance provides some underlying support for the currency. 

Across the Atlantic, however, the tide is turning. Signs of a cooling US labor market and slowing economy have investors betting that Fed Chairman Jerome Powell will soon start cutting rates to sidestep a recession. When American borrowing costs fall, the greenback loses some of its luster, thus pushing EURUSD higher.

Then there is a wildcard from Tokyo. Japan has been grappling with a chronically weak yen for years. Now, the central bank is fighting back with massive market intervention, including heavy dollar selling and aggressive yen buying, to prop up its battered currency. When an Asian heavyweight starts giving up such large amounts, the DXY takes a hit. Since the euro makes up roughly 57% of that basket, any greenback weakness against the yen often translates into an automatic lift for EURUSD. 

So here we are: two regulatory forces locked in a struggle. In one corner, high oil prices are dragging the euro down. In the other, expectations of a Fed rate cut and Japan's intervention are pushing it up. This tug-of-war explains why EURUSD is currently stuck in a choppy, volatile consolidation phase.

From a technical standpoint, the pair appears ready to retest the 1.17650 level.

The ultimate recommendation is to buy EURUSD. Lock in profits at 1.17650. Place Stop Loss at 1.1710.

Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.