Bearish View
- Sell the EUR/USD and set a take-profit at 1.1600.
- Add a stop-loss at 1.1800.
- Timeline: 2-3 days.
Bullish View
- Set a buy-stop at 1.1750 and a take-profit at 1.1850.
- Add a stop-loss at 1.1650.
The EUR/USD pair declined to the lowest level since November 2020 as Covid-19 risks remained. Investors also reacted to the latest housing statistics from the US and the FOMC minutes.
US Housing Data
The US housing market is doing relatively well as the country reopens and as interest rates remain low. Data published by the Census Bureau showed that the country’s building permits rose by 2.6% in July to more than 1.65 million homes. This was a strong rebound after the sales declined by 5.3% in the previous month.
Housing starts, on the other hand, declined by 7.0% in July after rising by 3.5% in the previous month. In total, the starts declined from more than 1.65 million to 1.534 million. This decline was mostly because of the ongoing supply shortage in the market. Also, the high cost of building has seen many builders slow down their building activities.
Recent economic numbers from the US have shown that the economy is doing relatively well. The labour market is approaching full employment, wages are rising, and consumer prices remain at their highest levels in more than a decade.
This is in contrast to the situation in Europe. Data released on Wednesday showed that the core CPI rose by just 0.7% in July. The overall inflation rose by 2.2% in July, mostly because of higher oil prices.
Meanwhile, the EUR/USD pair declined after the Federal Reserve published minutes of the past monetary policy meeting. The minutes showed that some members of the committee were starting to talk about tapering of asset purchases if the economy remains strong. Boston Fed’s Eric Rosengreen made the same case in an interview with the Financial Times.
The main mover for the EUR/USD pair will be the latest initial jobless claims numbers and the Philadelphia Fed manufacturing index. Analysts expect that the number of Americans filing for jobless claims declined last week while the manufacturing index rose to 23.
EUR/USD Technical Forecast
The 1D chart shows that the EUR/USD pair crossed the key support at 1.1716 on Wednesday. This was an important level since it was the lowest level in March this year. This price was also along the double-top pattern that formed between January and May this year.
The pair has also moved below the 25-day and 50-day weighted moving averages (WMA) while the Stochastic Oscillator moved to the oversold level. Therefore, the path of least resistance for the pair is lower. The next key level to watch will be the psychological level at 1.1600.
