Bearish View
- Sell the EUR/USD pair and add a take-profit at 1.1800.
- Add a stop-loss at 1.1900.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.1880 and add a take-profit at 1.1950.
- Add a stop-loss at 1.1800.
The EUR/USD price declined sharply after the relatively weak German sentiment data. The pair fell during the European, American, and Asian sessions and is currently at the lowest level this month. It has fallen by more than 0.55% from the highest point this month.
German Sentiment Waning
The delta variant of the pandemic is having an impact on the European economy. Data published by the ZEW Institute revealed that the German economic sentiment declined from 40.4 in August to 26.5 in September. This decline was significantly lower than the median estimate of 30.0.
At the same time, the current conditions sentiment increased from 29.3 to 31.9, which was lower than the expected 34.0.
These numbers came shortly before the official estimate of the Eurozone GDP data. According to Eurostat, the bloc' GDP rose from 2.0% in the first quarter to 2.2% in the second quarter. This increase was significantly better than the first and second estimates of 2.0%.
These numbers came as the European Central Bank (ECB) prepares to hold its September monetary policy meeting. Some analysts expect the bank to start deliberations on unwinding the giant 1.85 trillion euro quantitative easing program.
In a report, analysts at ING said that they expect the bank to point that core inflation will remain to the target in 2022. They also expect the bank to warn of the recovery's uncertainty and for them to avoid the talk of tapering during this meeting.
In other words, they expect the bank to fail to meet the hawkish expectations after the recent Eurozone inflation data. The numbers showed that the bloc's inflation rose to 3.0%, which was better than the bank's target of 2.0%.
EUR/USD Technical Analysis
The four-hour chart shows that the EUR/USD tested the key resistance of 1.1908 on Friday after the relatively weak non-farm payroll data. This was an important level since it was the highest level in July.
Since then, the pair has been on a sharp downward trend. And yesterday, it managed to move below the lower line of the ascending channel. Also, it dropped below the 23.6% Fibonacci retracement level, in a sign that bears are in control.
Therefore, the pair will likely maintain the bearish momentum as traders target the 38.2% retracement level at 1.1815. Later this week, the pair will likely resume the upward trend.
