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EUR/USD: Weak German IFO data may bolster bearish pressures

  • EUR/USD established a bearish lower high near 1.11 last week. 
  • A drop to 1.10 looks likely courtest of trade tensions.
  • The psychological support will likely be breached if the German IFO - Expectations (Nov) prints below estimates. 

EUR/USD is looking south and will likely drop below 1.10 on Monday if the German IFO data misses expectations.

Notably, the common currency fell from 1.1058 to 1.1014 on Friday, confirming a lower high at 1.1097, courtesy of the mixed German PMIs and the dismal Eurozone PMIs. European Central Bank's President Christine Lagarde said the global economic uncertainty is high and called for fiscal boost, as expected.

The newly established lower highs setup has opened the doors for a retest of 1.10. The case for a drop to the psychological support looks stronger if we take into account the fading US-China trade optimism. Reports hit the wires during the Asian session that the phase two of the US-China trade deal is less likely to happen anytime soon, given the two sides are struggling to ratify the phase one of the trade deal.  Note that the German economy has paid a heavy price for the year-long trade tensions.

Further, the dollar side of the story is looking strong, courtesy of Friday's better-than-expected U.S. Markit PMIs and an upward revision to the University of Michigan consumer sentiment.

All-in-all, there is little reason for the EUR traders to put a bid under the single currency on Monday and the support at 1.10 will likely be breached if the German IFOs, scheduled for release at 09:00 GMT, print below estimates, underlining the need for more stimulus.

That German economy is facing recession risk is generally accepted by now. Therefore, the forward-looking IFO - Expectations (Nov) index will take precedence over the Business Climate and the Current Assessment number. The Expectation index is seen printing at 92.5 versus 91.5 in October. An above-forecast reading could put a floor under the EUR.

Technical levels

EUR/USD

Overview
Today last price1.102
Today Daily Change-0.0003
Today Daily Change %-0.03
Today daily open1.1023
 
Trends
Daily SMA201.1073
Daily SMA501.1043
Daily SMA1001.1087
Daily SMA2001.1174
 
Levels
Previous Daily High1.1088
Previous Daily Low1.1014
Previous Weekly High1.1098
Previous Weekly Low1.1014
Previous Monthly High1.118
Previous Monthly Low1.0879
Daily Fibonacci 38.2%1.1043
Daily Fibonacci 61.8%1.106
Daily Pivot Point S11.0995
Daily Pivot Point S21.0968
Daily Pivot Point S31.0921
Daily Pivot Point R11.1069
Daily Pivot Point R21.1116
Daily Pivot Point R31.1143

Author

Omkar Godbole

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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