We mentioned in the previous technical analysis that the bullish correction for the pair is still weak and is expected to decline again if the Euro does not find stronger catalysts. The EUR/USD pair fell to 1.1275 support at the time of writing as expectations of ECB’s rate cut to the negative territory grew amid weak economic data from the Eurozone.
Despite the meeting between US President Trump and the Chinese president on the sidelines of the G20 summit and market optimism of renewed negotiations to resolve the most intractable global trade dispute, the pair remained stable with a bearish move and did not take advantage of recent optimism and pressure on the dollar. The markets are constantly questioning Trump's policy and the fears still lingering over any surprises regarding Chine trade file, as they have often been negotiating, and eventually new tariffs were imposed. US economic growth figures have not changed as expected, but economists expect the US economy to start slowing from the next announcement, with effects of Trump's stimulus plans evaporating.
The continuation of the global trade war means that the Eurozone economy is slowing increasingly and the Euro may lose its recent gains and more.
Both the European Central Bank and the Federal Reserve have confirmed readiness to cut interest rates to cope with the economic slowdown. The recent US economic data confirm the US economic slowdown and therefore market expectations are that the US interest rate could be reduced as soon as possible.
The German ZEW Economic Sentiment Index fell to its lowest level in seven months, confirming pessimism over the performance of the Eurozone's largest economy. On the daily chart below, it is clear that the pair lacks the sufficient and strong momentum for the upward correction. The European Central Bank (ECB) is in a cautious position, keeping the interest rates unchanged as expected, and ruling out a chance to raise interest rates later this year.
The bearish stability supports investors' question of the most appropriate timing for buying: this will depend on the return of confidence in the Euro and optimism about the imminent resolution of the US-China trade dispute, which increases the pressure on the Eurozone economy, which depends on manufacturing and exports. Technical indicators are still confirming oversold areas and the pair is ready for an upward correction.
Technically: We had expected and recommended in the previous analysis for a long time to sell the pair from every ascending level. Turning to the EUR / USD bullish trend needs a move towards the resistance levels 1.1355, 1.1440 and 1.1515 to confirm the upward correction strength. On the bearish side, the nearest support levels are currently 1.1240 and 1.1180 respectively, which are levels confirming the renewed strength of the bearish trend.
On the economic data front, the pair will watch for the release of the German retail sales data, the change in unemployment from Span and the PPI from the Eurozone. There are no important data from the U.S today.