EUR/USD: On the defensive after biggest single-day drop since July, eyes German data

EUR/USD fell 0.65% on Monday, the biggest single-day drop since July 1, as the weekend's attack on Saudi's oil production facilities put a haven bid under the greenback. 

Also, market chatter regarding the possibility of US tariffs on European Union's (EU) goods seemingly added to the bearish pressures around the EUR. 

On the defensive

Monday's drop poured cold water optimism generated by Thursday's bullish engulfing candle. Put simply, the immediate bullish outlook has been neutralized and a break above the descending trendline connecting June 25 and Aug. 6 highs is needed to put the bulls in a commanding position. 

Focus on German ZEW 

The ZEW survey – Economic Sentiment (Sep) is expected to print at -37.00 vs -44.1 in August. Meanwhile, the ZEW survey – Current Situation (Sep) is seen printing at -15.00, having printed at -13.5 in August. 

A big beat on expectations is needed to alleviate German recession fears and lift EUR/USD to levels above the falling trendline resistance, currently at 1.1087. 

A modest bounce is unlikely to yield big gains in the EUR, while a weaker-than-expected print will likely pave the way for a retest of recent lows near 1.0927. 

The bearish pressures would further strengthen if the geopolitical tensions in the middle east escalate, leading to increased demand for Treasuries and the US Dollar. As of writing, the pair is trading at 1.1012, representing marginal gains on the day. 

Technical levels