Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.1310.
- Add a stop-loss at 1.1575.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.1440 and a take-profit at 1.1550.
- Add a stop-loss at 1.1310.
The EUR/USD exchange rate pulled back and trimmed some of the earlier gains as hopes of a trade deal rose. After soaring to a high of 1.1575 on Monday, the pair retreated to 1.1437 ahead of the upcoming flash PMI numbers.
Trade jitters ease after IMF warning
The EUR/USD pair pulled back after the IMF warned that the US and European economies would be hurt by Donald Trump’s tariffs. In a statement, the agency trimmed the US growth for the year to 1.5%, down by 0.9% from the January forecast.
The IMF also trimmed the European growth target to 0.7%, down by 0.7% from the last estimate. It expects the Chinese economy to grow by 3.2%, down by 1.3%.
These numbers mean that Trump’s tariffs will have a major implication, leading to either a recession or stagflation in some countries.
The EUR/USD pair retreated after Treasury Secretary, Scott Bessent, hinted that the trade war between the US and China would de-escalate. He cited the 145% and 125% tariff as unsustainable and that some deal will eventually be made. However, he expects that a comprehensive deal will take between two to three years.
The next key catalyst for the pair will be the upcoming flash manufacturing and services PMI numbers. Economists expec the data to show that the European services PMI dropped from 51 in March to 50.7 in April, while the manufacturing figure moved downwards from 48.6 to 47.5.
In the US, the expected manufacturing and services PMI figures are 49.5 and 52, a drop from the previous month. The EUR/USD pair will react to statements from several Fed officials like Austan Goolsbee, Beth Hammack, and Christopher Waller.
EUR/USD technical analysis
The EUR/USD exchange rate soared to a high of 1.1575 on Tuesday and then pulled back to 1.1435. This retreat happened as investors took profit after Bessent’s statement.
The pair remains above the important support point at 1.1212, the upper side of the cup and handle pattern. It has moved above all moving averages, and the second resistance of the Woodie pivot point.
Therefore, the most likely scenario is where the recent strong rally takes a breather and drops to the second resistance level at 1.1310. A drop below that level will point to more declines to 1.1212. It will then resume its uptrend.
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