Current trend

The EUR/USD pair is flat during the Asian session, holding at 1.0740, having received no support from EU macroeconomic statistics.

In June, the German ZEW economic sentiment index corrected from 47.1 points to 47.5 points with calculations of 50.0 points, and the indicator for assessing current economic conditions from –72.3 points to –73.8 points, contrary to forecasts of –65.0 points. ZEW President Achim Wambach said that respondents’ inflation expectations had increased, as the EU May consumer price index was 0.2% MoM and 2.6% YoY, while the core indicator was 0.4% MoM and 2.9% YoY. Against this background, Vice President of the European Central Bank (ECB), Luis de Guindos, suggested that the September and December meetings will be the most important for determining further steps in monetary policy since quarterly forecasts will be presented there. The official noted that the course to reduce the cost of borrowing has been taken. However, the development of the situation in the short term will depend on incoming data. The regulator’s chief economist, Philip Lane, believes that inflation will return to the target of 2.0% in the second half of next year. However, the officials would have to analyze the current situation carefully.

The American dollar strengthened slightly against macroeconomic statistics. The May industrial production increased from 0.0% to 0.9%, while analysts expected 0.3%, and retail sales from –0.2% to 0.1% with preliminary estimates of 0.2%. In addition, the data for the previous month were revised, where, instead of zero dynamics, a decline of 0.2% was recorded. Based on this information, traders have revised their forecasts for the US Fed interest rate adjustment by the end of 2024. According to the Chicago Mercantile Exchange (CME) FedWatch Instrument, the probability of a 25 basis point cut at the agency’s September meeting is now 67.0%, while at the beginning of the week, it did not exceed 61.0%. On Thursday at 14:30 (GMT 2), in addition to initial jobless claims, a report from the real estate market is due. The May volume of started construction may increase from 1.36M to 1.37M, and the number of construction permits from 1.44M to 1.45M.

Support and resistance

On the daily chart, the trading instrument retreats from the resistance line of the downward channel with dynamic boundaries of 1.0870–1.0490. Technical indicators strengthen the sell signal: fast EMA on the Alligator indicator move away from the signal line, expanding the range of fluctuations, and the AO histogram forms downward bars, falling in the sell zone.

Resistance levels: 1.0770, 1.0880.

Support levels: 1.0700, 1.0610.

Trading tips

Short positions may be opened after the price declines and consolidates below 1.0700, with the target at 1.0610. Stop loss is around 1.0760. Implementation period: 7 days or more.

Long positions may be opened after the price grows and consolidates above 1.0770, with the target around 1.0880. Stop loss is 1.0700.