EUR/USD Forecast: Bears gain ground amid a worsening sentiment
|EUR/USD Current Price: 1.0897
- The market mood took a turn for the worse during the Asian session following Chinese data.
- Market players hold their breath ahead of the FOMC Meeting Minutes.
- EUR/USD gains bearish traction in the near term and could head towards 1.0800.
The EUR/USD pair remains stuck around the 1.0900 threshold on Wednesday, touching an intraday low of 1.0865 during European trading hours. The market mood soured amid escalating tensions between China and the US following Beijing's decision to restrict exports of gallium and germanium starting August 1. Such metals are critical to chip-making, and markets see it as a retaliatory move against Western rivals. United States (US) Treasury Secretary Janet Yellen is visiting Beijing to work out the tense relationship between the two major economies.
The market sentiment also suffered from Chinese data showing industrial activity weakened in June. The Caixin Services PMI printed at 53.9, down from the previous 57.1. Also, S&P Global published the final Services PMIs for the EU, most of which suffered downward revisions. The German index came down to 50.6 from 50.8, while the EU reading was revised to 52 from 52.4 previously estimated. On a positive note, the Eurozone Producer Price Index (PPI) printed at -1.9% MoM in May, and declining from a year earlier by 1.5%.
The American macroeconomic calendar includes May Factory Orders and the latest FOMC Meeting Minutes, which may shed additional light on the Federal Reserve's (Fed) plans to continue with monetary tightening after June's pause.
EUR/USD short-term technical outlook
The EUR/USD pair bounced from the 38.2% Fibonacci retracement of its latest daily run, measured between 1.0634 and 1.1011 at 1.0866, with the next Fibonacci resistance at 1.0921. Technical readings in the daily chart show the pair is on the brink of turning bearish. EUR/USD struggles to retain ground above a bullish 20 Simple Moving Average (SMA), although still well above the longer ones. At the same time, the Momentum indicator is crossing its 100 line into negative territory with a firmly bearish slope, while the Relative Strength Index (RSI) indicator hovers directionless at around 51.
The risk skews to the downside in the near term and according to the 4-hour chart. EUR/USD meets sellers on advances towards the 20 and 100 SMAs, both converging in the 1.0900/10 price zone. At the same time, the Momentum indicator gains downward traction within negative levels while the RSI consolidates around 47, favoring another leg south without confirming it. A break of the aforementioned Fibonacci support should ensure bears are taking over in the upcoming sessions.
Support levels: 1.0865 1.0820 1.0770
Resistance levels: 1.0920 1.0960 1.1010
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