Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.1090.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.100 and a take-profit at 1.1100.
- Add a stop-loss at 1.0800.
The EUR/USD sell-off continued as the pair tumbled to the lowest level since July 7th as the US dollar firmed. The pair dropped to the key support level at 1.0874 on Monday and then pulled back to 1.0921
US retail sales data ahead
The US dollar index continued rising this week amid rising concerns about the American and global economy. These gains continued after last week’s mixed US inflation data. The numbers showed that the headline consumer price index (CPI) rose to 3.2% while core CPI fell to 4.7%.
These numbers mean that the Federal Reserve will likely pause its rate hikes in the next meeting in September. The bank has already pushed rates from zero during the pandemic to a 22-year high of 5.50%.
The EUR/USD pair is also under pressure because of the happenings in the global economy. China, the second-biggest economy in the world, is struggling, as evidenced by the weak industrial production data published today.
There are more cracks in the Chinese economy as Country Garden, a leading real estate failed to pay its bonds. It could be the second-biggest company in China to go under after Evergrande collapsed two years ago. As a result, the US dollar has become a safe haven for investors.
The next key data to watch will be the upcoming US retail sales data. With the unemployment rate and prices falling, there is a likelihood that retail sales did well in July. Economists expect the numbers to show that core retail sales dropped by 0.3% in July while the headline figure rose by 0.4%.
In Europe, the key event to watch will be a report by the European Commission on Europe’s economic forecasts. Still, the impact of this report on the EUR/USD pair will be limited.
EUR/USD technical analysis
The EUR/USD pair has been in a downward trend in the past few weeks. Along the way, the pair has moved below the important support level at 1.1090, the highest level on April 27th. It has moved below the 25-day and 50-day moving averages.
Also, the pair is above the ascending trendline shown in green. This trendline connects the lowest level since March. Therefore, the pair will likely continue falling as sellers target this trendline at ~1.0800. The stop-loss of this trade is at 1.1090.
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