The losses of the EUR/USD currency pair increased against the dollar after the positive numbers of US economic data, in addition to the US Federal Reserve's assertion of continuing tightening until record inflation is contained. The currency pair's losses extended to the support level at 1.0861, its lowest in five weeks, before settling around 1.0884 at the time of writing. The currency pair will have an opportunity to move towards the psychological support level of 1.0800 in the event that the results of the upcoming US economic data confirm the path of tightening the US Central Bank's policy. In addition, that the US economy is still flexible and will not be subject to stagnation in light of that policy.
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Overall, most of last month's Federal Reserve officials still viewed high inflation as a continuing threat that could necessitate further increases in US interest rates, according to the minutes of their July 25-26 meeting released on Wednesday. At the same time, officials saw "a number of tentative indications that inflation pressures may be easing." A diverging view was that she reiterated Bank Governor Jerome Powell's non-committal stance on future interest rate hikes in a press conference after the meeting.
According to the minutes, Fed policymakers also said that despite signs of progress on inflation, it remained well above their 2% target. They "will need to see more data ... to be confident that inflation pressures are easing" and on track to return to their target.
On the economic front, the EU's preliminary GDP for the second quarter matched the (QoQ) and (YoY) forecasts of 0.3% and 0.6%, respectively. Industrial production for June exceeded the expected change (MoM) of -0.1% with a change of -0.5%. The equivalent (YoY) beat forecast of -4.2% with a change of -1.2%, while Q2 Primary Employment Change beat expectations (YoY) of 1.4% with a change of -1.5%. The corresponding QoQ was 0.2%.
In the US, US Building Approvals for July missed the expected (monthly) number of 1.463M by a count of 1.442M. The change in building permits for the period beat the estimate of -1.7% with a change of 0.1% recorded. Housing Starts and Change in Housing Starts for the period beat estimates of 1.448 million and 2.7%, respectively, by 1.452 million and 3.9%, while industrial production for the period exceeded the expected change (month-over-month) of 0.3% with a change of 1%.
Technical analysis of the EUR/USD pair:
- The price of the EUR/USD currency pair has now declined several levels below the 100-hour moving average line.
- As a result, it appears that the currency pair is about to enter the oversold levels of the 14-hour RSI.
- In the near term, according to the performance on the hourly chart, it appears that the EUR/USD is trading within a bearish channel formation.
- The MACD indicator has recently completed a bearish cross indicating a bearish bias in the short term.
Therefore, the bears will be looking to extend the current wave of declines towards 1.0852 or below to support 1.0821. On the other hand, the bulls will be looking for a bounce around 1.0903 or higher at 1.0930 resistance.
On the long run, and according to the performance on the daily chart, it appears that the EUR/USD is trading within the formation of a descending channel. The MACD continues to show a continuation of the current bearish bias in market sentiment. Therefore, the bears will target long-term profits at around 1.0775 or below at the support at 1.0668. On the other hand, the bulls will be looking to pounce on profits around resistance 1.0984 or higher around resistance 1.1080.
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