Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.0925.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0890 and a take-profit at 1.0950.
- Add a stop-loss at 1.0800.
The EUR/USD pair dropped to the lowest level since June 14th and then quickly rebounded after the relatively weaker US flash PMI numbers. The rate fell to 1.0800 and then rose to 1.0862.
Mixed US economic data
The EUR/USD pair dropped and then bounced back after the weak US and European manufacturing and services output numbers. In Europe, the flash manufacturing PMI rose to 43.7 while the services figure retreated to 48.3. The composite PMI fell to 47, signaling that the two sectors are contracting.
In the United States, the manufacturing PMI dropped from 49.0 to 47. It has remained in a contraction zone even after the growing investments in EVs and semiconductors. Meanwhile, the services PMI dropped from 52.3 in July to 51 in August.
The EUR/USD pair also reacted to the latest US new home sales numbers. Data showed that new home sales rose by 4.4% in July to 714k. They had fallen by 2.8% in the previous month. Building permits came in at 1.443 million, better than the expected 1.442 million.
These numbers mean that the country’s housing sector is doing well even as mortgage rates soared to a two-decade high. The average 30-year mortgage rate jumped to 7.31%.
The EUR/USD pair will react to several important economic numbers from the US. For example, the Bureau of Labor Statistics (BLS) will publish the latest initial and continuous jobless claims numbers.
Most importantly, the US will release July’s durable goods order numbers. Economists expect the numbers to show that durable goods orders retreated by 4.0% while core orders jumped by 0.2%.
These numbers will come ahead of the upcoming meeting at Jackson Hole. With no rate decisions scheduled this month, the meeting will provide more information about what to expect in September.
EUR/USD technical analysis
The EUR/USD pair has been in a strong bearish trend after peaking at 1.1273 in July. On the 4H chart, it has formed a descending channel shown in green. It retested the lower side of the channel on Wednesday. The pair has also moved below the 50-period moving average.
Also, the pair has moved to the middle line of the Donchian Channels. Therefore, the outlook for the pair is bearish, with the next key support level to watch being at 1.0800.
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