With the start of this week’s trading, the price of the EUR/USD currency pair completed the downward path, closing last week’s trading around the support level 1.0232. The EUR/USD pair was subjected to selling operations for the third consecutive day, starting from the resistance level 1.0368.

The euro was affected by the June industrial production in the EU exceeding expectations (MoM) at 0.2% with 0.7%. The equivalent (YoY) outperformed 0.8% by 2.4%. In Germany, the HS CPI for July matched expectations (on an annual basis) at 8.5%. The EQ (MoM) also came in line with expectations of 0.8%.

From the United States, the preliminary US consumer confidence index from Michigan for August exceeded expectations at 52.5 with a reading of 55.1. The import and export indicators for July left expectations (monthly) at -1% and -1.1% respectively with readings of -1.4% and -3.3%. Earlier last week, initial US jobless claims last week beat the expected claims count of 263K with a total drop of 262K. On the other hand, the previous week’s continuing claims went against the 1.407 million expectation with the number of claims rising by 1.428 million.

EUR/USD Technical Analysis

In the near term and according to the hourly chart, it appears that the EUR/USD is trading within a descending channel formation. This indicates a significant short-term bearish momentum in market sentiment. Therefore, the bulls are looking to extend Friday’s rebound towards 1.0313 or higher to 1.0359. On the other hand, the bears will look to take profits around 1.0213 or lower at 1.0168.

In the long term and according to the performance on the daily chart, it appears that the EUR/USD is trading within a gently descending channel formation. This indicates a slight long-term bearish momentum in the market sentiment. Therefore, the bears will target long-term profits at around 0.10003 or lower at 0.9707. On the other hand, the bulls will look to pounce on profits at around 1.0537 or higher at 1.0776.

As I mentioned before, the divergence in economic performance and the future of monetary policy tightening by central banks between the eurozone and the United States of America will continue to hamper any gains for the EUR/USD currency pair.

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I believe in selling rallies at this point, but we may get a short-term bounce.

The German DAX stock market initially fell on Friday, but the €12,800 level seems to be hanging on as far as support is concerned, and it’s likely that the market may try to bounce from here. I see a lot of resistance above, so therefore I think it’s going to be difficult to get overly bullish but if you are short of this market, it’s probably time to start thinking about taking profits.

The €13,200 level is an area that I think will difficult overcome, although I suppose it is possible if the ECB starts to show more signs of accommodation after that, then the market will have the tangle with the €13,500 level, followed by the €13,600 level. It’s not until we break through all of that area that I would consider this a potential buying opportunity, and then I would anticipate that the DAX could make it to the €14,500 level.

We have seen a lot of selling pressure near €14,500 previously, so I would anticipate that there should be a significant amount of supply in that area. Breaking above that would obviously be longer-term bullish, but that’s a difficult thing to think of in this environment as traders around the world are worried about a global recession. Keep in mind that the German index is full of companies that are major exporters, and therefore other economies around the world have an outsized influence on this index. As long as that’s going to be the case, you will have to pay attention to the United States, Asia, and of course peripheral Europe.

The one thing that the DAX has going in its favor is that the euro is very cheap at the moment, and that does help the idea of exports moving around the world. German goods are cheap for a lot of economies right now, but if the customer is struggling to pay bills, I don’t know how much that helps in the long term. I believe in selling rallies at this point, but we may get a short-term bounce. Then short-term bounce should be thought of as an opportunity if you are patient enough, but if we were to turn around and break down through the hammer from the Friday session, we may simply fall apart and reach down toward the €12,500 level underneath.

For four trading sessions in a row, the price of the euro currency pair EUR/USD was subjected to correctional selling after its recent gains towards the 1.1185 resistance. The selling operations pushed it towards the 1.0960 support level, and as mentioned before that breaking below the 1.1000 level will restore the bears to control the trend. The divergence in the future of tightening monetary policy of global central banks and the extent of vulnerability to the Russian-Ukrainian war will not be in favor of the continuation of any chance for the euro to make gains.

There are no major reports due from the Eurozone throughout the week, so investors may take cues from the US economy for the EURUSD pair. The release of the FOMC minutes could lead to strong volatility later. Remember that the Federal Reserve raised US interest rates in its latest policy decision, so traders are keen to see how seriously the central bank is taking its tightening plans. The data was mostly stronger than expected, especially in terms of inflation, so many are still hoping to see back-to-back hikes or even bigger increases in borrowing costs.

Any indication that the Fed is still playing it safe could dash hopes for a 0.50% hike at the next meeting, which could lead to losses for the US dollar.

Overall, the EUR/USD rate has eased from its high in late March, but it will likely suffer a deeper setback if the international response to alleged Russian atrocities in Ukraine leads to new volatility in energy markets over the coming days. A stronger dollar and uncertainty over prospects for a peace deal in Ukraine pulled the euro back from gains made in late March ahead of the weekend. The single European currency remained in full swing on Monday and may be at risk of further declines during the coming days.

Large increases in energy prices and risks of supply disruptions caused by the war in Ukraine have weighed heavily on the euro in recent weeks, more than offsetting the impact of European Central Bank (ECB) monetary policy that has steadily become less of a burden on the euro.

According to the technical analysis of the pair: The EUR/USD exchange rate is heading to the upside, forming higher bottoms and higher highs within an ascending channel on its short term time frame. The price is finding support in the area of ​​interest around Fibonacci and the bottom of the channel. In particular, the 61.8% retracement level holds as support and lines up with the 200 SMA dynamic inflection point. A bigger pullback may find buyers at the key psychological level of 1.1000, just below the bottom of the channel, which might be the neutral correction line.

The 100 SMA is still above the 200 SMA to confirm that there is a chance for a correction in the near term, but in the long term the overall trend of the EUR/USD is still bearish. Any bullish momentum for the currency pair may not exceed the 1.1200 resistance. In the near term, stochastic is moving higher to show that buyers are in control, but the oscillator is approaching an overbought area to indicate exhaustion. The RSI is also trending higher and has more room to go up before reversing overbought levels.