EURUSD rebound is not over yet

This week the EURUSD currency pair rebounded from a two-month low set below 1.08. During 3 days of strong growth, the price almost reached the level of 1.095, where the bulls' activity began to decline markedly. However, this does not mean that the upward movement has already ended. After partial profit taking by euro buyers, the EURUSD growth may well continue.

Recently published statistics on the U.S. economy had an extremely negative impact on the dollar. The situation began to deteriorate on Tuesday, when the data on open positions in American companies were reported. The figure fell below the 9 million level for the first time since the spring of 2021. If the monthly report on Friday confirms the cooling of the U.S. labor market, the dollar may weaken even further.

But the statistics on open positions was not the only reason for selling of the American currency. Yesterday the EURUSD rebound was supported by the revised figures on the U.S. GDP growth for the 2nd quarter. According to the second estimate, the economy increased by 2.1%, which turned out to be significantly worse than the initial rate of 2.4%. The chances for the end of the Fed's rate hike cycle are becoming more likely.

Meanwhile, the ECB will probably have to tighten monetary policy at least one more time. Preliminary statistics on EU inflation for August showed that the price growth rate remained at July's level of 5.3% (a decline to 5.1% was expected). Core inflation matched the forecast of a slowdown from 5.5% to 5.3%, but this is unlikely to have pleased the European regulator's officials. The Fed officials are now much closer to the 2% price growth target, so the likelihood of rate hikes by the ECB in September is rather high.

The RSI indicator reversed from the oversold zone and confirms a signal to buy EURUSD. The nearest target for euro buyers is the 1.095 level, which was not reached yesterday.

The following trading strategy may be offered:

Buy EURUSD for the current price. Take profit – 1.095. Stop loss – 1.08.

Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.