Current trend

During the Asian session, the European currency shows a moderate decline, developing a weak corrective impetus formed the day before. At the moment, EUR/USD is testing 1.0985 for a breakdown, waiting for new drivers to appear on the market.

The focus of investors is the final statistics on inflation in Germany for July. The preliminary estimate showed a slowdown in the annual value from 6.4% to 6.2%, which is still well above the targets of the Bundesbank and the European Central Bank (ECB). Forecasts for revised data on the Consumer Price Index do not imply any changes compared to the original values, and therefore the market reaction may be very restrained. In the meantime, moderate pressure on the euro remains, as market participants evaluate the statistics on industrial production from Germany, presented the day before: in June, the figure fell by 1.5%, which is significantly higher than the 0.5% expected by experts. The development of the negative dynamics, which has been observed for the second month in a row, is facilitated, first of all, by a decrease in the number of new orders, as well as a reorientation to the execution of those orders that were previously postponed due to the coronavirus pandemic.

In turn, among the members of the European regulator, disagreements are intensifying regarding further steps to adjust the interest rate at the September meeting against the backdrop of lower price pressure and ongoing recession risks. European Central Bank (ECB) board member Fabio Panetta believes the value should be held at current levels for a longer time in order to bring inflation to the 2.0% target without causing excessive damage to the economy and without jeopardizing financial stability. However, he did not rule out the possibility of further tightening of monetary stimulus if the inflation forecast deteriorates significantly.

On Thursday, American investors will pay attention to updated data on consumer inflation, where current forecasts suggest a possible acceleration of the annual value from 3.0% to 3.3%, which may serve as another argument for the US Federal Reserve in favor of raising interest rates before the end of the current year.

Support and resistance

On the daily chart, Bollinger Bands are steadily declining. The price range is actively narrowing, reflecting ambiguous nature of trading in the short term. MACD indicator reverses to growth trying to form a new buy signal (the histogram is about to consolidate above the signal line). Stochastic is rapidly approaching its highs, indicating the risks of the single currency being overbought in the ultra-short term.

Resistance levels: 1.1000, 1.1050, 1.1100, 1.1150.

Support levels: 1.0969, 1.0930, 1.0891, 1.0850.

Trading tips

Short positions may be opened after a breakdown of 1.0969 with the target at 1.0891. Stop-loss — 1.1010. Implementation time: 2-3 days.

A rebound from 1.0969 followed by a breakout of 1.1000 may become a signal for opening long positions with the target at 1.1100. Stop-loss — 1.0950.