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Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0940.
- Add a stop-loss at 1.1090.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.1091.
- Add a stop-loss at 1.0935.
The EUR/USD exchange rate wavered on Monday and Tuesday morning as the market reflected on the encouraging European economic numbers. It was trading at the psychological level at 1.100, higher than last week’s low of 1.0945.
European economic recovery
The EUR/USD pair remained in a tight range after Europe published mixed economic numbers. Germany, the biggest economy in the region, reported weak import price index and retail sales numbers. The import price index dropped by 1.6% in June, translating to a 11.4% YoY decline. Retail sales fell by 1.6% during the month.
Additional data revealed that the European economy expanded in the second quarter. It expanded by 0.3% in Q2, leading to a year-on-year increase of 0.6%. This growth was better than the median estimate of 0.2% and 0.5%, respectively.
Meanwhile, Europe’s annual inflation remained stubbornly high in July. Preliminary numbers revealed that the consumer price index (CPI) dropped from 5.5% in June to 5.3% in July. Core inflation dropped by 0.1% on a MoM basis points leading to an annual growth rate of 5.5%.
These numbers came a few days after the European Central Bank (ECB) delivered its monetary policy meeting. In it, the bank decided to hike interest rates by 0.25%, pushing them to the highest level in more than 20 years. The bank also signaled that it will end interest rate hikes in a bid to prevent a hard landing.
The EUR/USD will react to the latest manufacturing PMI and German jobs numbers. Economists expect the numbers to show that the unemployment rate remained at 5.7% in July. They also expect the numbers to show that the European manufacturing PMI dropped from 46.5 in June to 45 in July. In the US, the manufacturing PMI is also expected to remain below 50.
EUR/USD technical analysis
The EUR/USD exchange rate has been in a downward trend after peaking at 1.1275 in July. It moved below the important support level at 1.1091, the highest point in May. The pair also remains below the 50-period moving average and the 38.2% Fibonacci Retracement level.
It is also trading at an important level since it was its highest point on June 22nd. The MACD has moved slightly below the neutral point. Therefore, the pair will likely resume the downward trend as sellers target the key support at 1.0940.
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