EUR/USD Forecast: Modest bounce falling short of suggesting a bottom

EUR/USD Current Price: 1.0737

• Dismal Euro Zone and German macroeconomic data fueled stagnation concerns.
• Upbeat United States data fuels hopes for a tepid economic setback.
• EUR/USD trades near the 1.0700 figure and has room to extend its decline near term.

The EUR/USD pair bounced from a three-month low posted at 1.0705 on Tuesday as the US  Dollar strengthened on the back of a sour mood. Concerns about global economic growth put pressure on stock markets while boosting demand for the safe-haven Greenback.

Financial markets remained on the back foot throughout the first half of Wednesday,  with European indexes falling on the back of tepid local data. German Factory Orders plummeted in July, declining by 11.7% MoM and 10.5% on a yearly basis. Furthermore, Euro Zone Retail Sales fell 0.2% MoM in July, further hinting at stagnation in the EU.

Across the pond, the United States (US) published MBA Mortgage Applications for the week ended September 1, which were down 2.9%. Also, the July Goods and Services Trade Balance, which posted a deficit of $65 billion in July, slightly better than the $65.8 billion anticipated by market players.

After Wall Street’s opening, S&P Global will release the final estimate of the US August Services and Composite PMIs, while the country will release the ISM Services PMI for the same month, foreseen at 52.5, slightly below the previous 52.7.

EUR/USD short-term technical outlook

The EUR/USD pair trades in the 1.0730 price zone, and despite the intraday bounce, the risk remains skewed to the downside. In the daily chart, the pair comfortably develops below all its moving averages. The 100 and 200 Simple Moving Averages (SMAs) stand directionless well above the current level, but the 20 SMA heads firmly south between the longer ones. Technical indicators consolidate near oversold readings, giving up their downward momentum amid the recent bounce. Still, technical indicators are far from suggesting downward exhaustion while giving no signs of a directional shift.

The 4-hour chart shows that the 20 SMA has extended its slide below the longer ones, now acting as dynamic resistance at around 1.0770. At the same time, the Momentum indicator turned lower within negative levels, while the Relative Strength Index (RSI) indicator consolidates around 34, all of which suggests bears are willing to push the pair to fresh lows.

Support levels: 1.0705 1.0670 1.0630

Resistance levels: 1.0770 1.0810 1.0850  

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