Economic and political factors push EURUSD towards 1.0850

The EURUSD currency pair pulled back from a three-day high of 1.0775 as investors await comments from US Federal Reserve (Fed) Chair Jerome Powell and European inflation data.

Traders will be looking for signals of a possible rate cut in Powell's speech later on Tuesday. This week, they will also monitor ADP employment data, the ISM services index, the minutes of the Fed's last meeting and the non-farm payrolls report.

Market participants are also expecting the EU consumer price index today. According to Eurostat projections, the year-on-year inflation rate should decline by 0.1% to 2.5%. Confirmation of this forecast may shortly reduce the value of the European currency.

The euro's latest strengthening took place on the background of the victory of Marine Le Pen's far-right party in the first round of France’s snap elections. The right-wing National Rally is ahead of the New Popular Front and President Emmanuel Macron's coalition. However, the far-right party potentially has less votes than it needs to win an absolute majority in the second round of the elections. Investors now await the second round scheduled for July 7. The euro may resume an uptrend within a week as alliances are formed to weaken Le Pen's party leadership.

From a technical perspective, the EURUSD quotes have broken out of the downtrend on the H4 timeframe. In terms of wave analysis, the price is forming the second downward wave. Moving indicators of the Stochastic Oscillator (standard values) are approaching the oversold zone. This increases the likelihood of the reversal of the current downtrend and formation of the third upward wave.

Signal:

The short-term outlook for EURUSD suggests buying. 

The target is at the level of 1.0850.

Part of the profit should be taken near the level of 1.0775.

A stop-loss could be placed at the level of 1.0660.

The bullish trend is short-term, so trade volume should not exceed 2% of your balance.