EUR/USD: EUROPEAN ECONOMY SHOWS SIGNS OF RECOVERY
| Scenario | |
|---|---|
| Timeframe | Weekly |
| Recommendation | SELL STOP |
| Entry Point | 1.1040 |
| Take Profit | 1.0940 |
| Stop Loss | 1.1100 |
| Key Levels | 1.0940, 1.1040, 1.1084, 1.1190 |
| Alternative scenario | |
|---|---|
| Recommendation | BUY STOP |
| Entry Point | 1.1084 |
| Take Profit | 1.1190 |
| Stop Loss | 1.1020 |
| Key Levels | 1.0940, 1.1040, 1.1084, 1.1190 |
Current trend
The EUR/USD pair is moving in a downward trend significantly below the annual highs, trading at 1.1055.
Stable macroeconomic statistics support the euro. The Q2 gross domestic product (GDP) in Italy increased by 0.2% MoM, justifying forecasts, and from 0.7% to 0.9% YoY. In addition, the Italian manufacturing PMI increased from 47.4 points to 49.4 points. After poor reports last month, similar indicators are recovering in Germany (from 42.1 points to 42.4 points) and France (from 42.1 points to 43.9 points) in August. Although they are far from the growth zone of 50.0 points, the positive dynamics can be regarded as a sign of the EU economic recovery.
The American dollar retreated from a year’s low and is trading at 101.20 in the USDX. With trading closed for Labor Day on Monday, investors focused on expectations for today’s August manufacturing PMI, which may fall to 48.0 from 49.6, and the Institute for Supply Management (ISM) manufacturing PMI, which may grow to 47.5 from 46.8. Friday’s personal consumption expenditures price index missed on July’s expected rise from 2.5% to 2.6%, raising the prospects of a –50 basis point Fed rate cut in September, with about 33.0% expecting such a scenario, while more than 60.0% expect a –25 basis point reduction.
Support and resistance
On the daily chart, the trading instrument is correcting above the resistance line of the ascending channel with dynamic boundaries of 1.1000–1.0750.
Technical indicators are weakening the buy signal: fast EMAs on the Alligator indicator are approaching the signal line, narrowing the range of fluctuations, and the AO histogram is forming downward bars, falling in the buy zone.
Resistance levels: 1.1084, 1.1190.
Support levels: 1.1040, 1.0940.
Trading tips
Short positions may be opened after the price declines and consolidates below 1.1040, with the target at 1.0940. Stop loss is around 1.1100. Implementation period: 7 days or more.
Long positions may be opened after the price grows and consolidates above 1.1084, with the target around 1.1190. Stop loss – 1.1020.
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