EUR/USD Analysis: risk aversion could send it sub-1.1180
|EUR/USD Current Price: 1.1221
- US Federal Reserve officials signaled an insurance rate cut, dollar rose.
- German data continues to disappoint, weighing on the common currency.
- EUR/USD capped by a critical Fibonacci resistance for two weeks in-a-row.
The American dollar has closed the week on a high note as hopes for significant rate cuts faded. Following ultra-dovish comments from NY Fed’s Williams on Thursday, different members from the central bank signaled an insurance quarter-percentage-point rate cut this month against a steeper macroeconomic slowdown. The EUR/USD pair finished the week at around 1.1220, as the common currency was hit by another round of disappointing German data, with the Producer Price Index in the country falling by 0.4% MoM in June, up by 1.2% when compared to a year earlier. The greenback rose Friday despite the preliminary estimate of the Michigan Consumer Sentiment Index for July came in below the market’s expectations at 98.4, although above the previous 98.2.
The macroeconomic calendar will provide with little data of relevance, as Germany will release the Buba Monthly Report while the US will publish the Chicago Fed National Activity Index for June, previously at -0.05. Meanwhile, mounting tensions in the Strait of Hormuz, as Iran seized a UK oil tanker, will likely trigger risk-averse related movement at the weekly opening.
EUR/USD short-term technical outlook
The EUR/USD pair has retreated for a second consecutive week from a critical Fibonacci resistance, the 38.2% retracement of the latest daily decline, measured between 1.1411 and 1.1192, finishing it not far above this last. In the daily chart, the 20 DMA converges with the mentioned Fibonacci level, reinforcing the relevance of the resistance area, while the 100 DMA gains bearish strength, now around the next Fibonacci level at 1.1245. Technical indicators in the mentioned chart stand within negative levels, the Momentum aiming higher, but the RSI already resumed its decline, currently at 44, anticipating some additional declines ahead, particularly on a break below 1.1180. Shorter term, and according to the 4 hours chart, the risk is also skewed to the downside, as the pair is developing below bearish moving averages, while technical indicators head south, the Momentum around its mid-line and the RSI at 43.
Support levels: 1.1180 1.1150 1.1106
Resistance levels: 1.1245 1.1280 1.1315
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