Bearish view
- Sell the EUR/USD pair and set a take-profit at 1.0800.
- Add a stop-loss at 1.1050.
- Timeline: 2 days.
Bullish view
- Set a buy-stop at 1.100 and a take-profit at 1.1075.
- Add a stop-loss at 1.0925.
The EUR/USD pair continued falling as investors embraced a risk-off sentiment after Fitch downgraded US credit rating from AAA to AA+. The pair retreated to a low of 1.0920, the lowest level since July 7.
Risk-off sentiment
The EUR/USD pair has been in a strong downward trend as the US dollar index (DXY) jumped to the highest level in weeks. The most recent news was the decision by Fitch to downgrade America’s credit rating. In its statement, the agency warned about the country’s debt and rising budget deficit.
As a result, the dollar index surged while American equities plunged, with the Dow Jones and Nasdaq 100 indices falling by more than 1%. American bond yields rose, with the 10-year and 30-year soaring to 4.08% and 4.17%, respectively.
The EUR/USD pair retreated after the strong American jobs numbers. Data by ADP revealed that the non-farm payrolls (NFP) rose by 324k in July, better than the median estimate of 189k. The company also downgraded its June estimate to 455k.
The Bureau of Labor Statistics (BLS) will publish the official NFP numbers on Friday. Economists expect the data to show that the economy added more than 180k jobs in July while the unemployment rate remained at 3.5%.
The EUR/USD will have several important events on Thursday. S&P Global will publish the latest services PMI numbers, which are expected to show that the sector expanded during the month. In the US, the Institute of Supply Management (ISM) will publish the non-manufacturing PMI numbers.
The other important numbers to watch on Thursday will be the upcoming American factory orders, durable goods, and initial jobless claims numbers.
EUR/USD technical analysis
The EUR/USD pair has been in a strong bearish trend in the past few weeks. It dropped to a low of 1.0946, which was lower than last month’s high of 1.1273. The pair dropped to the lower side of the Donchian Channels. It has moved below the 50% Fibonacci Retracement level.
Additionally, the MACD indicator has moved below the neutral level while the Stochastic RSI dropped below the oversold level. Therefore, the pair will likely continue falling as traders target the next key support at 1.0800. The stop-loss of the bearish view is at 1.1050.
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