EURUSD Forecast: Bulls are losing the battle

(Valeria Bednarik – FXStreet)

EUR/USD Current Price: 1.0163

– Tepid EU data hints at a steeper economic decline in the Union.

– Wall Street ignored soft housing data and cheered encouraging industrial news.

– EUR/USD is at risk of falling despite bouncing ahead of the daily close.

The EUR/USD pair recovered from a fresh weekly low of 1.0121 to end the day pretty much unchanged in the 1.0160 price zone. The American dollar maintained its positive momentum until the US opening, helped by a cautious mood amid recession fears.

Disappointing macroeconomic data affected both currencies. During the European session, the shared currency was hit by the EU June Trade Balance, which posted a seasonally adjusted deficit of €30.8 billion. Also, the German ZEW Survey showed that the Economic Sentiment in the country plunged to -55.3 in August, while the sentiment for the whole Union declined to -54.9.

US figures were mixed. July Building Permits declined by 1.3% MoM, while Housing Starts in the same period were down a whopping 9.6%. The figures exerted pressure on the greenback. On a positive note, and backing stocks’ rally, Industrial Production was up 0.6% MoM in July, while Capacity Utilization in the same period increased to 80.3%, both beating the market expectations.

On Wednesday, the EU will publish the second estimate of the Q2 Gross Domestic Product, foreseen at 0.7% QoQ, while the US will publish July Retail Sales, expected to have increased by 0.1% MoM. In the American afternoon, the FOMC will publish the Minutes of the latest US Federal Reserve monetary policy meeting. Market players will be looking for clues on the size of the September rate hike, considering inflationary pressures have finally started easing.

EUR/USD short-term technical outlook

The EUR/USD pair trades in the 1.0170 price zone, below the 38.2% retracement of the 1.1614/0.9951 decline at 1.0205 but above the next Fibonacci support at 1.0105. Technical readings in the daily chart skew the risk to the downside, as the pair is currently developing below a now flat 20 SMA, while the longer moving averages maintain their firmly bearish slopes far above the current level. Meanwhile, the RSI indicator consolidates at around 45, while the Momentum indicator crosses its midline into negative territory, supporting another leg south.

In the 4-hour chart, the pair is still developing below all of its moving averages, with the 20 SMA accelerating its decline above the longer ones. Technical indicators have bounced from oversold levels, heading north below their midlines but falling short of supporting a firmer recovery. The bearish case should lose steam if the pair recovers above 1.0205, the aforementioned Fibonacci resistance level. A break below 1.0105, on the other hand, would expose the pair to a retest of parity.

Support levels: 1.0150 1.0105 1.0070

Resistance levels: 1.0205 1.0240 1.0280

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