- The current account balance from July dropped to 21.6B against the predicted 22.3B.
- The EUR/USD is trading sharply bearish at 1.1701 level ahead of the FOMC meeting this week.
- Forex trading market participants may look for a sell trade below $1.1735 with an initial target of $1.1664 level.
The EUR/USD closed at $1.1725 after placing a high of $1.1789 and a low of $1.1724. EUR/USD pair dropped for the 8th session in the previous ten sessions on Friday and reached its lowest since August 23rd. On the other hand, the EUR/USD is trading sharply bearish at 1.1701 level ahead of the FOMC meeting this week.
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The decline in the currency pair EUR/USD could be attributed to the rising strength of the US dollar after the release of Thursday’s US Retail Sales data, which surged unexpectedly in August and added to the expectations of tapering by the Federal Reserve in its upcoming policy meeting. The strength of the US dollar dragged the EUR/USD currency pair to its three-week lowest level on the board.
The stronger US dollar continues to drive selling in EUR/USD.
The US Dollar Index that measures the greenback’s value against the basket of six major currencies rose to 93.25 on Friday despite the poor macroeconomic data release. The US Treasury yields on the benchmark 10-year note also rose to 1.38% and added further strength to the US dollar, which dragged the EUR/USD currency pair further to the downside. Furthermore, the risk-off market sentiment kept US bond yields higher and US stock indices between 0.26% and 1.19%.
Quick Update on Economic Data
On the data front, at 13:00 GMT, the Current Account Balance from July dropped to 21.6B against the predicted 22.3B. It weighed on the single currency Euro and added in the loss of EUR/USD. At 14:00 GMT, the Final CPI for the year remained flat with the expectations of 3.0%. The Final Core CPI also came in line with the forecasts of 1.6%.
From the US side, at 01:00 GMT, the TIC Long-Term Purchases in July declined to 2.0B against the anticipated 60.5B and weighed on the US Dollar that further caped loss in EUR/USD. At 19:00 GMT, the Prelim UoM Consumer Sentiment fell to 71.0 against the anticipated 71.9and weighed on the US dollar, limiting the decline in EUR/USD. The Prelim UoM Inflation Expectation for September rose to 4.7% against the previous 4.6%.
Meanwhile, market participants are keenly awaiting the release of the minutes from the monthly policy meeting of the Federal Reserve as they are expecting hints about tapering stimulus measures that kept the US dollar high on board. Furthermore, the escalating tensions between China and the Western allies, including, the US, Australia, and the UK, also weighed on the market sentiment and kept the riskier assets under pressure, like the EUR/USD.
EUR/USD Price Forecast – Daily Technical Levels
Support Resistance
1.1725 1.1735
1.1719 1.1739
1.1715 1.1745
Pivot Point: 1.1729
EUR/USD Price Forecast – Downward Channel Breakout Ahead of FOMC
The EUR/USD is trading sharply bearish at 1.1701 level ahead of the FOMC meeting this week. In the 4-hours timeframe, the EUR/USD currency has violated the downward channel at the 1.1705 level, and a breakout below this level can extend the selling trend until the 1.1664 level.
The double bottom pattern provides immediate support at the 1.1664 level. On the flip side, a formation of candles below the 1.1752 level suggests the chances of a selling trend in the EUR/USD pair. Thus, it can lead the market towards the next resistance level of 1.1797.
In the case of a bearish breakout below the 1.1664 level, the chances of a bearish trend remain strong until 1.1625 and 1.1601. On the 4-hours timeframe, the 50-day exponential moving average is likely to provide resistance at the 1.1755 level. Thus, the currency pair suggests a strong bearish bias.
On the other hand, the leading technical indicator, stochastic RSI, is holding in a sell zone. It’s demonstrating a selling trend in the EUR/USD currency pair. Therefore, Forex trading market participants may look for a sell trade below $1.1735 with an initial target of $1.1664 level. Alternatively, buy trades can be taken above the $1.1650 level to target $1.1725. All the best!
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