GemForex - EUR/USD

The EUR/USD finds itself in the red at the time of writing, down for the week but still in the 200-pip range set in mid-July. Since then, news from the US and a solid US job market temporarily spooked the recession ghost that hovers above the Western nations, and in this case, the Eurozone. Although thats good news, the released European data signals a contraction beginning in the Union, and EUR/USD remains technically bearish for the upcoming months ahead. 

While the majority of Western Banks reversed their dovish course ahead of shocking inflation numbers, the European Central Bank, on the other hand, got into the tune of the regressing markets a little bit later than expected, and it only remains a question if the tools under the ECBs disposal will be effective. 

The ECB finds itself in a precarious position, considering the fact that the Eurozone as a whole enters Autumn facing the worst energy crisis of its time, with prices soaring across every sector and further adding pressure on already high inflation and supply-chain issues. The chaos extends potentially to food provision and industrial autonomy, due to tensions with Ukraine and the sanctions on Russia, which backfired badly.

And yet, the ECB still considers that a recession is unlikely for this year and the next, and sticks to its cautious tightening, another reason why EUR/USD remains close to a multi-decade low of 0.9951.

For the first time since the Eurozone crisis of 2010, the macroeconomic data released these past few weeks showed that the EU is not in a good shape, and the German and EU retail sales fell into negative territory in June while manufacturing output in the region stood contracted during July. Apart from services activities also decreasing, the industrial production and factory orders in Germany, contracted year to year. 

Inflation, energy shortage crisis, and the potential negotiations over Ukraine will take center stage this and next week, especially for Germany, confirming if the ECB is capable of battling or at least dealing with the aforementioned issues.  

On the technical front, EUR/USD currently trades in the range of 1.01850 – 1.01500, confirming the uncertainty of the market, as the current price is ranging below the regional high of 1.1950, and the RSI sell momentum remains intact. 

The daily chart gives little clues for the short-term, but as technical indicators turn south and retain the bearing slope, a break below 1.0105 will open the door for a retest of parity, with the main bearing target at 0.988. 

On the upper side, the immediate resistance comes at 1.0205, before needing to accelerate through 1.0280 and towards 1.0360, to get out of the negative zone. If that is confirmed, the next up barrier comes at 1.0490 and finally 1.0615. 

Nevertheless, EUR/USD has to pass many macroeconomic and technical hurdles in order for that possibility to become reality, and we will have to see if the market will maintain its bearing bias, or not.