Current trend

The EUR/USD pair is showing slight growth, recovering from a noticeable decline the day before, which led to a renewal of the local lows of August 19. The instrument is testing 1.1050 for a breakout, while investors are awaiting the publication of statistics on production inflation in the eurozone today at 11:00 (GMT 2).

Analysts expect the Producer Price Index to slow down in July from 0.5% to 0.3%, and in annual terms, it is expected to increase from –3.2% to –2.5%. It is unlikely that such statistics will have a significant impact on future decisions by the European Central Bank (ECB) regarding the vector of monetary policy, especially given that the US Federal Reserve is preparing to conduct its first interest rate cut in September. Some officials believe the eurozone economy looks weaker and the risk of recession remains as companies aggressively cut jobs, Reuters sources said. This, in turn, has a negative impact on consumption, so the European regulator needs to reduce borrowing costs at a faster pace. Eurozone business activity data is also due out later in the day, with the S&P Global Manufacturing Composite PMI expected to remain at 51.2 points in August and the Services PMI reading at 53.3 points.

The Institute for Supply Management (ISM) released its August business activity statistics in the US yesterday: the Manufacturing PMI rose from 46.8 points to 47.2 points, but remained in the stagnation zone. Thus, the industrial sector is slowing down, which satisfies the US Federal Reserve's conditions for easing monetary policy: currently, most experts expect that borrowing costs will be reduced three times by a total of 100 basis points by the end of the year. Today, the market will receive data on Factory Orders, as well as the monthly economic review from the US regulator, the Beige Book, which could influence officials' decision on the interest rate. Current forecasts suggest a –50-basis-point adjustment with only about a 30.0% probability.

Support and resistance

In the D1 chart, Bollinger Bands are reversing horizontally. The price range is narrowing, reflecting ambiguous dynamics of trading in the short term. MACD is going down preserving a stable sell signal (located below the signal line). Stochastic, having retreated from its lows, is trying to reverse upwards and leave the oversold area. Current readings of the indicators signal in favor of a full-fledge corrective trend in the ultra-short term.

Resistance levels: 1.1100, 1.1150, 1.1200, 1.1243.

Support levels: 1.1047, 1.1000, 1.0964, 1.0930.

Trading tips

Long positions can be opened after a breakout of 1.1100 with the target of 1.1200. Stop-loss — 1.1047. Implementation time: 2-3 days.

The return of a "bearish" trend with the breakdown of 1.1000 may become a signal for new short positions with the target at 1.0900. Stop-loss — 1.1047.