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  • EUR/USD stands still near the 1.1800 level.
  • The divergence between the US and Eurozone GDP can weigh on the pair.
  • The 10-year bond yields of the US and Germany is negative for the EUR/USD.
  • Fed’s hawkish stance can be expected during meeting minutes and Jackson Hole Symposium.

The EUR/USD outlook is bullish near the key 1.1800 area despite fundamental barriers. However, the risk sentiment has to play a big role.

The EUR/USD is at 1.1799, 0.04% at the time of writing on Monday.

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The US and UK GDP growth is likely to stay ahead of GDP growth in the Eurozone. It seems that such a divergence has not been priced to the full extent yet. Hence, the strength in the EUR/USD pair can be short-lived.

According to the IMF, the economic growth in the US and the UK can hit 7% this year which is the highest number among the developed nations, compared to the 4.6% projection for the Eurozone.

This could be one of the reasons why the Fed and BOE are likely to tighten their monetary policies ahead of the ECB. Thus, the Fed can outline its plan of monetary policy tightening in the coming up Jackson Hole Symposium while the ECB may continue to retain its dovish tone.

Moreover, the US 10-year bonds yield is 1.8% more than that of the 10-year German Bund, and the gap is likely to widen with Fed’s potential hawkishness.

The recent takeover of the Taliban in Afghanistan and US-China trade tension can deteriorate the risk sentiment that can weigh on the Euro.

Coronavirus fears in Eurozone

The spread of the Delta variant across Europe has slowed down. However, the travel restrictions still exist for a longer time. Nevertheless, the fear of virus spread is gradually decreasing.

Fed tapering talks

The minutes of the FOMC meeting is due this week. As meeting minutes and retail sales data are released, participants are eager to see how US Treasury yields react. According to its press release, “substantial progress” has been made at the Fed’s July 27-28 meeting. This seems to reinforce the notion that Fed policymakers are not interested in turning off the asset purchase program before year’s end. In addition to demonstrating deteriorating consumer sentiment, retail sales data can also reveal changes in consumer behavior.

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EUR/USD technical outlook: 1.1800 needs some strength to break

EUR/USD 4-hour chart outlook
EUR/USD 4-hour chart outlook

The EUR/USD price seems to consolidate near the 1.1800 level. The price may find some retracement to accumulate enough strength to break the hard resistance. The volume shows quite a positive stance that can further support the bullish momentum. However, the pair has so far covered the 19% average daily range. The 20-period SMA on the 4-hour chart near 1.1835 may provide further resistance.

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