The EURUSD currency pair was actively growing during the last week, moving from 1.075 to 1.097. However, the "bulls" failed to rise further to the important level of 1.1, and now there is a pullback of quotes to the level of 1.09. Currently, the decline is characterized by a quite moderate correction, but the movement may accelerate sharply this evening.
Fed Chairman Jerome Powell will address the U.S. House Finance Committee on Wednesday. If Powell confirms intentions to raise interest rates more in order to fight inflation, the dollar could get back a significant part of last week's losses against other currencies. The latest macroeconomic statistics exactly calls the head of the U.S. regulator to act drastically.
The U.S. housing market data for May released yesterday were strong. The number of building permits as well as the number of houses under construction jumped to the highest level in more than a year. Previously, the real estate sector was one of the most troubled in terms of economic activity, reacting negatively to sharply rising interest rates and higher mortgage costs.
Probably an average 10% decrease in residential real estate prices over the last year led to an increase in deals. But such a scenario is definitely unfavorable for the Fed, as the growth in demand could lead to an acceleration of inflation again. Recently, the U.S. regulator's representatives have constantly stated about the dependence of the monetary policy's future on the incoming economic statistics. Positive housing market data strongly favors Powell's hawkish rhetoric, which means significant support for the dollar.
Yesterday the EURUSD pair quotes already tested the level of 1.09. It was not possible to fix lower at the first time, but today the "bears" may have one more chance. The RSI indicator, which is close to the overbought zone, also hints at a decline. Yesterday's low at 1.089 will be the first target for the downside movement, and then the way to 1.085 might open.
The following trading strategy option can be suggested:
Sell EURUSD in the range of 1.092-1.094. Take profit 1 – 1.089. Take profit 2 – 1.085. Stop loss – 1.097.
This content is for informational purposes only and is not intended to be investing advice.
