Bearish view
- Sell the EUR/USD and set a take-profit at 1.0700.
- Add a stop-loss at 1.0835.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 1.0815 and a take-profit at 1.0865.
- Add a stop-loss at 1.0750.
The EUR/USD pair remained under pressure as divergence between the American and European economies continued. The rate was trading at 1.0800 on Tuesday, a few pips above last month’s low of 1.0765.
European economic woes
Recent economic numbers show that the European economy is not doing well. On Monday, data showed German exports dropped again in July. Exports retreated by 0.9% after rising by 0.2% in June. Imports rose by 1.4%, leading to a smaller trade surplus of 15.9 billion euros.
The German real estate sector is also contracting, with many companies in the sector struggling. Real estate firms are going through weak demand and tighter liquidity as interest rates remains at the highest level in years.
The EUR/USD pair reacted mildly to a statement by Christine Lagarde, the head of the European Central Bank (ECB) chair. In her statement in London, she maintained that the bank will be data-dependent when making its decision this month.
Recent economic numbers from Europe showed that the core consumer price index (CPI) dropped to 5.3% in July. The ECB has insisted that it wants to see signs of sustainable fall before halting its rate hikes.
The EUR/USD pair will remain in a tight range on Tuesday. The key data to watch will be the flash services and composite PMI numbers from Europe. Economists expect that the services PMI fell to 48.3 in August while the composite PMI dropped to 47.
Eurostat will also publish the latest European producer price index (PPI) data. Economists expect the data to show that the PPI dropped by 0.6% in July, translating to a YoY decline of 7.6%.
The only data to watch from the United States will be the latest factory order numbers. While important, these numbers will likely have no major impact on the pair.
EUR/USD forecast
The EUR to USD pair started falling after peaking at 1.1273 on July 18th. On the 4H chart, the pair is nearing the 78.6% Fibonacci Retracement level. It has also flipped the crucial support level at 1.0836 into resistance. The pair has dropped below the 25-period and 50-period moving averages.
Most importantly, the pair is hovering above the important support at 1.0765 (August low). Therefore, a break below the support at 1.0765 will point to more downside, with the next support to watch being at 1.0700.
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