The EUR/USD pared recent gains and retreated from the 1.1000 level on Tuesday as markets continue digesting recent rebalancing in Forex market flows. Investors have possibly regained equilibrium and have once again returned to betting on an increase in the pace of rate cuts by the Federal Reserve in September. Tuesday’s Eurozone economic data had a slight impact on the market, and Wednesday’s data is expected to be average.
Pan-European retail sales contracted by 0.3% year-over-year (y-o-y) in June, below estimates of a 0.1% increase and down from a revised 0.5% in the previous year. German industrial production figures will be released on Wednesday and are expected to rebound to 1% month-on-month growth in June from the previous period’s contraction of 2.5%.
According to CME’s FedWatch tool, investors are looking at a two-to-one chance of two 50 basis point cuts when the Federal Open Market Committee announces its interest rate decision on September 18. Currently, with the cuts in place, rate markets see no chance of the Fed keeping rates unchanged this year, with a total of four estimated quarter-point cuts for the latter part of the year.
This week, watch for any news from Fed policymakers pointing to the desirability of accelerated interest rate cuts in the United States. This would boost the euro.
EUR/USD Daily Technical Analysis for August of 7th:
According to the daily chart, the uptrend in the EUR/USD remains in place. Selling from above key levels is considered the best trading strategy. Selling above the psychological resistance at 1.1000 is recommended. Today’s trend of the euro against the dollar will be influenced by potential signs of an economic recession in the United States, which may be announced by central bank leaders globally. According to the daily chart, the 1.0820 support level will remain crucial for bears to regain control of the trend.
