Eyes on CPI Figures Ahead
The EUR/USD closed at $1.1718 after placing a high of $1.1744 and a low of $1.1710. On Tuesday, the currency pair EUR/USD dropped for the 8th consecutive session and followed its bearish trend amid the rising strength of the U.S. dollar. The U.S. Dollar Index that measures the greenback's value against the basket of six major currencies surged on Tuesday and reached above 93 levels that weighed on riskier asset EUR/USD. The U.S. Treasury Yields on benchmark 10-year note also rose on Tuesday and reached 1.357%, which added strength to the U.S. dollar and dragged EUR/USD downwards.
On the data front, at 14:00 GMT, the ZEW Economic Sentiment for August dropped to 42.7 against the forecasted 55.3 and weighed on the single currency Euro that added further loss in EUR/USD. The German ZEW Economic Sentiment also declined in August and fell to 40.4 against the projected 54.9 and weighed on the single currency Euro that added further loss in EUR/USD pair.
From the U.S. side, at 15:00 GMT, the NFIB Small Business Index for July declined to 99.7 against the anticipated 101.9 and weighed on the U.S. dollar that further caped loss in EUR/USD. At 17:30 GMT, the Prelim Nonfarm Productivity for the quarter surged to 2.3% against the projected 3.3% and supported the U.S. dollar that added further decline in EUR/USD. The Prelim Unit Labor Costs remained flat with the projections of 1.0%.
The economic sentiment around Europe and Germany fell short of expectation and weighed on the single currency Euro. The third consecutive monthly decline in economic sentiment points was due to increased risks for the German economy, including the possible fourth wave of coronavirus starting in autumn. This also kept the single currency under pressure and dragged EUR/USD downwards.
Meanwhile, two Federal Reserve officials indicated on Monday that the pace of the U.S. recovery and higher inflation could prompt discussions about reducing economic support and starting interest rates hikes by the central bank. The investors will keep a close watch on the release of U.S. consumer price index and producer price index data expected to come out on Wednesday and Thursday, respectively.
The U.S. dollar strength driven by the hopes that Fed might start reducing economic support and increase interest rates sooner than expected kept the riskier asset EUR/USD lower for seven consecutive sessions.
EUR/USD Intraday Technical Levels
Support Resistance
1.1704 1.1738
1.1690 1.1758
1.1671 1.1772
Pivot Point: 1.1724
EUR/USD - Technical Outlook
The EUR/USD is trading with a strong bearish bias, having violated the narrow trading range of 1.1730 – 1.1700 level. The EUR/USD pair has entered the oversold zone; however, the recent bearish engulfing candle still supports a selling trend in EUR/USD pair. On the 4-hour chart, the EUR/USD's next support holds around 1.1690 and 1.1670 level. At the same time, the resistance continues to stay at the 1.1725 level. Closing of candles below 1.1725 level is supporting bearish bias in the EUR/USD pair. Today, the investor's primary focus will be staying on the U.S. CPI data that will likely trigger further market price action. All the best.
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