Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.0965.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0912 and a take-profit at 1.100.
- Add a stop-loss at 1.0850.
The EUR/USD sell-off continued in the overnight session as the US dollar index (DXY) surge gained steam. The pair dropped to a multi-week low of 1.088 after the latest Federal Reserve minutes.
FOMC minutes and strong US data
The US has published strong economic numbers in the past few days. On Tuesday, the government published strong July retail sales. Sales jumped by 0.7% in July from the previous 0.4%, signaling that the American consumer is doing well.
The housing sector is also doing well. Building permits rose by 0.1%, better than the expected decline of 1.7%. Housing starts rose by 3.9% after falling by 11.7% in the previous month.
Data released on Wednesday showed that industrial production rose to 1% in July after plunging by 0.8% in June. Manufacturing production rose by 0.5%, which is a positive sign.
These numbers mean that the economy is doing modestly well even after the recent interest rate hikes.
The EUR/USD pair also declined after the Federal Reserve published minutes of the last meeting. These minutes showed that most FOMC members backed another rate hike even as they remained concerned about overtightening.
Therefore, most analysts believe that the Fed will likely be patient in the coming months. Officials fear that more rate hikes will lead to a hard landing while an extended pause could push inflation higher.
The EUR/USD pair also declined after the latest European economic data. According to Eurostat, the bloc’s industrial production rose from 0.2% to 0.5% in June. The employment change also increased by 1.5%. As a result, the economy expanded by 0.6% in Q2.
EUR/USD technical analysis
The EUR/USD pair continued falling in the overnight session as the US dollar index rally continued. It slipped below the support at 1.0912, the lowest level on August 3rd. It has moved to the 61.8% Fibonacci Retracement level.
The pair has dropped below the 25-day and 50-day exponential moving averages (EMA) and the Ichimoku cloud indicator. At the same time, the Average Directional Index (ADX) has dropped to 11.
Therefore, the path of the least resistance is lower, with the next support to watch being at 1.0800. On the upper side, the next resistance level to watch will be at 1.0970.
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