EUR/USD Forecast: Dark clouds put double-bottom in danger, Fed minutes could trigger tumble
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UPGRADE- EUR/USD has been under pressure amid the worsening market mood.
- Rising US and German covid cases, weaker economic data and fear of the Fed could exacerbate the fall.
- Wednesday's four-hour chart is showing bears are in control.
If at first, you don't succeed, try, try again – that seems to be the motto for EUR/USD bears, who are banging on 1.17. A long list of concerns has been pushing the safe-haven dollar higher, and one more push could trigger a downfall.
US Retail Sales figures badly disappointed with a drop of 1.1% in July, far worse than a modest fall of 0.2% projected. The Retail Control Group also tumbled, while minor upward revisions for June failed to impress. A slowdown in consumption in the world's largest economy has broader implications for the global economy, sending investors to the safety of the greenback – despite the fact that the downbeat data came from America.
COVID-19 cases are also worrying investors. The average daily number of new US infections continues rising, topping 139,000 on Monday, and it could continue rising. Undervaccinated areas are suffering more than others. These issues are not limited to America.
While Europe is now leading the US in vaccinations – and has fewer cases when considering the population – the recent increase in Germany is of concern. Without an improvement in the old continent, the European Central Bank will likely maintain its bond-buying scheme for longer.
Source: FT
Jumping back to America, the central bank is where the next move could come from. Federal Reserve Chair Jerome Powell refrained from making any significant comments on policy in a speech on Tuesday, allowing the dollar to rise. The stage is now set for the Fed's meeting minutes.
Protocols from the bank's July gathering could show the calls for tapering down the bank's bond-buying scheme are gaining ground. In the post-decision press conference, Powell referred to the committee on several occasions, reflecting a growing divide. Public comments from Fed officials and media reports also suggest there is growing support for reducing the current $120 billion/month printing scheme sooner rather than later.
While recent inflation readings were not alarming – and may prove the theory that price rises are transitory – the 5.4% annual level is still troubling to some. Moreover, the last two Nonfarm Payrolls reports were robust, perhaps mounting to "substantial further progress." The is the Fed's vague term for tapering.
Overall, the dollar remains on a strong footing and could push higher in response to the Fed's meeting minutes.
EUR/USD Technical Analysis
Euro/dollar has created a double-bottom at the round 1.17 level after nearing that point – the pair's launching level in 1999 – twice in the past week. That critical support could be breached as momentum on the four-hour chart remains to the downside. Moreover, the Relative Strength Index (RSI) is still above 30, thus outside oversold conditions.
Below 1.17, the next critical cushion is also a double-bottom – 1.1614, dating back to the fall of 2020. It is followed by 1.15.
Some resistance is at 1.1725, a support line from last week, and then by 1.1755 and 1.1785, as both capped EUR/USD in recent days.
- EUR/USD has been under pressure amid the worsening market mood.
- Rising US and German covid cases, weaker economic data and fear of the Fed could exacerbate the fall.
- Wednesday's four-hour chart is showing bears are in control.
If at first, you don't succeed, try, try again – that seems to be the motto for EUR/USD bears, who are banging on 1.17. A long list of concerns has been pushing the safe-haven dollar higher, and one more push could trigger a downfall.
US Retail Sales figures badly disappointed with a drop of 1.1% in July, far worse than a modest fall of 0.2% projected. The Retail Control Group also tumbled, while minor upward revisions for June failed to impress. A slowdown in consumption in the world's largest economy has broader implications for the global economy, sending investors to the safety of the greenback – despite the fact that the downbeat data came from America.
COVID-19 cases are also worrying investors. The average daily number of new US infections continues rising, topping 139,000 on Monday, and it could continue rising. Undervaccinated areas are suffering more than others. These issues are not limited to America.
While Europe is now leading the US in vaccinations – and has fewer cases when considering the population – the recent increase in Germany is of concern. Without an improvement in the old continent, the European Central Bank will likely maintain its bond-buying scheme for longer.
Source: FT
Jumping back to America, the central bank is where the next move could come from. Federal Reserve Chair Jerome Powell refrained from making any significant comments on policy in a speech on Tuesday, allowing the dollar to rise. The stage is now set for the Fed's meeting minutes.
Protocols from the bank's July gathering could show the calls for tapering down the bank's bond-buying scheme are gaining ground. In the post-decision press conference, Powell referred to the committee on several occasions, reflecting a growing divide. Public comments from Fed officials and media reports also suggest there is growing support for reducing the current $120 billion/month printing scheme sooner rather than later.
While recent inflation readings were not alarming – and may prove the theory that price rises are transitory – the 5.4% annual level is still troubling to some. Moreover, the last two Nonfarm Payrolls reports were robust, perhaps mounting to "substantial further progress." The is the Fed's vague term for tapering.
Overall, the dollar remains on a strong footing and could push higher in response to the Fed's meeting minutes.
EUR/USD Technical Analysis
Euro/dollar has created a double-bottom at the round 1.17 level after nearing that point – the pair's launching level in 1999 – twice in the past week. That critical support could be breached as momentum on the four-hour chart remains to the downside. Moreover, the Relative Strength Index (RSI) is still above 30, thus outside oversold conditions.
Below 1.17, the next critical cushion is also a double-bottom – 1.1614, dating back to the fall of 2020. It is followed by 1.15.
Some resistance is at 1.1725, a support line from last week, and then by 1.1755 and 1.1785, as both capped EUR/USD in recent days.
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