- At the beginning of trading this week the EUR/USD exchange rate found support above its lows in July.
- The interaction between European economic data and Chinese currency policy could have an important impact on EUR/USD such as the statements of global monetary policy officials during the Jackson Hole Symposium, Wyoming in the coming days.
- The bearish correction of the EUR/USD currency pair reached the support level 1.0833, its lowest in two months.
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In general, the single European currency - the euro - was the third best performer in the basket of major G10 currencies for the week until Tuesday. It occupied a prominent position in the upper half of the G20 ranking after a simple set of inflation figures for the month of July released on Friday and the Eurostat report, which indicated in Earlier last week that the European economy has stabilized in the second quarter.
The final reading of European inflation for July was unchanged at 5.5% last week, while Eurostat data indicated eurozone growth of 0.3% followed in the second quarter from 0.2% growth previously, putting the European economy ahead of its UK counterpart and potentially putting the euro in place and in good shape for the coming weeks. But the most significant impact on price action has been developments in the Chinese economy with spillover effects on foreign exchange policy, forex and government bond markets elsewhere including the US where rising long-term bond yields have been cited as undermining investors' appetite for risk in recent days.
Commenting on performance. “While the US dollar has recently found support from the ‘higher for longer’ interest rate theme, it has also found buyers in the back with safe-haven flows as news from China becomes more concerning,” says Jane Foley, forex analyst at Rabobank. She added in the forecast, “We maintain our forecast for the EUR/USD for 3 months at 1.08 and we see the risk of the EUR/USD pair returning to support 1.06 over 6 months before giving way to Fed rate cuts in front of softer expectations.” for the US dollar.”
Technical analysis of the euro against the dollar:
EUR/USD recently fell through the support level around the minor psychological level at 1.0950, then fell to 1.0850 before rising. It might be appropriate to retest the previous low, as this is in line with the Fibonacci retracement levels. The 38.2% Fibonacci level is located at 1.0929, while the 50% level is closer to the target area at 1.0955. The biggest correction may reach Fibonacci 61.8% at 1.0980, but a breach above this level may indicate the return of the euro bulls to the movement.
Technical indicators mostly point to a continuation of the sell-off, as the 100 SMA is below the 200 SMA, reflecting bearish pressure. The Simple Moving Average 200 coincides with the Fibonacci level of 38.2%, which increases its strength as resistance. If any of the levels can keep the gains in check, the EURUSD may resume falling to the swing low or lower level.
At the same time, Stochastic is pointing upwards, but it is approaching the overbought area, which indicates exhaustion among the buyers soon. A decline again means that the bearish momentum is back, and therefore the EURUSD may follow suit. The RSI is also heading higher to indicate that the buyers are in control at the moment, but the oscillator is approaching the overbought territory to indicate that the sellers are about to take over.
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