EUR/USD Forecast: Sellers take action after upbeat US data

EUR/USD turned south after having recovered to the 1.0950 area on Thursday.
US Dollar continues to gather strength on upbeat macroeconomic data.
A drop below 1.0870 could open the door for an extended slide.

Eren Sengezer FXStreet

EUR/USD rose toward 1.0950 following hot inflation data from Germany and Spain but failed to preserve its recovery momentum. The pair faces key support at 1.0870 and additional sellers could come into play if that level fails.

Inflation in Germany, as measured by the change in the Consumer Price Index (CPI), climbed to 6.4% on a yearly basis in June from 6.1% in May, Destatis reported on Thursday. In the same period, the Harmonised Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred gauge of inflation, rose to 6.8% from 6.3%. Earlier in the day, data from Spain showed that the CPI rose 0.6% on a monthly basis in June after having stayed unchanged in May.

In the meantime, annualized Gross Domestic Product (GDP) growth in the US got revised higher to 2% from 1.3% in the first quarter. Additionally, the US Department of Labor announced that there were 239,000 Initial Jobless Claims last week, much lower than the market expectation of 265,000.

Following these data releases, the US Dollar gathered strength against its rivals and didn't allow EUR/USD to continue to benefit from hot inflation readings.

Wall Street's main indexes remain on track to open in positive territory, with US stock index futures rising between 0.3% and 0.4% ahead of the opening bell. In case risk mood improves in the American session, EUR/USD's losses could remain limited in the near term.

EUR/USD Technical Analysis

EUR/USD was last seen trading near 1.0870, where the Fibonacci 23.6% retracement of the latest uptrend and the 100-period Simple Moving Average (SMA) on the 4-hour chart align. If the pair starts using that level as resistance, sellers could target 1.0840 (Fibonacci 50% retracement) and 1.0815 (200-period SMA) next.

On the upside, resistances are located at 1.0920/30 (Fibonacci 23.6% retracement, 20-period SMA, 50-period SMA), 1.0960 (lower-limit of the broken ascending regression channel) and 1.1000 (psychological level).

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Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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