EUR/USD Forecast: Correction looks temporary, bears are in control

The EUR/USD is moving higher towards the higher end of the 1.1500 handle. Once again, the primary driver is the US Dollar, which is taking a breather from earlier gains. After a few days of concern regarding trade, markets are now rising. The better mood is accompanied by a slide in the value of the greenback after it gained ground on Monday.

The rise of the pair is not assisted by the euro side of the equation. German Industrial Production dropped by 0.9% in June, worse than expected. The fresh figure released today joins the disappointing Factory Orders report on Monday which showed a decline of 4%. The continent's locomotive is slowing down. Trade balance figures from both Germany and France also fell short.

While none of these data points is of high significance, they all point to the same downward direction and could weigh on the EUR/USD once the fresh USD sell-off ends.

The economic calendar remains light with the US publishing the JOLTs jobs report and Consumer Credit later in the day, but they are not expected to move markets.

We can expect US President Donald Trump to talk about trade or international relations in general. The US reimposed sanctions on Iran, a follow-up on the abandoning of the nuclear deal, the JCPOA. Iran is not an economic heavyweight like the European Union or China, but the US policy on the Middle-Eastern country has implications for trade relations with Europe. Many European firms have business interests in Iran. An aggravation of US-Iranian ties impacts the US-EU trade negotiations.

EUR/USD Technical Analysis

The EUR/USD remains under pressure despite the recent upswing. Momentum is to the downside. The Relative Strength Index (RSI) on the four-hour chart is below 50 but above 30, not in oversold territory. The loss of uptrend support continues weighing on the pair. 

Also, the euro/dollar is trading below the 50 and 200 Simple Moving Averages, with the 50 one crossing below the 200 one, yet another bearish sign.

Monday's low at 1.1530 is the immediate support line, followed by 1.1508 which was the lowest level in 2018. Further down, 1.1472 and 1.1442 are confluence levels.

1.1585 is the swing high so far today. Stronger resistance awaits at the 1.1620 level which was a support line in late July. The next level to watch is 1.1665 that separated ranges in July and also coincides with the 200 SMA.

More: EUR/USD nears critical support, break or bounce? – Confluence Detector