Fundamental analysis of EUR/USD
EUR/USD is trading around 1.10800. The weakening dollar provides some support to the pair, while buyers remain cautious amid concerns that the eurozone may enter recession.
The US Dollar Index (DXY), which tracks the dollar's yield against a basket of six major currencies fell to 101.230. This came after the previous day's strong PMI index provided support for the US Dollar Index. However, the currency depreciated amid expectations of intervention and support from China's central bank and uncertainty over the Fed's policy after July. Recent news on the state of China's financial markets and stimulus measures boosted market sentiment. However, uncertainty in the US PMI index cast doubt on the Fed's plans to raise interest rates after zero demand. As a result, bulls are struggling to capitalize on the currency's decline. Meanwhile, S&P 500 Index futures are still hanging around 4580 and failing to extend the previous day. The 10-year and 2-year U.S. Treasury bond yields have also retreated from two-week highs of 3.86% and 4%, respectively.
No ECB members are scheduled to speak today, so media commentary remains a potential market mover. Later in the day, the US Central Bank Consumer Confidence Index for July is expected to rise to 111.5 from 109.7, indicating a possible increase in consumer spending and inflationary pressures. Such indicators could influence Fed decisions as consumers are likely to react to speculation that the Fed may slow down. A larger-than-expected drop in the index will challenge consumer sentiment as it is expected to fall from 88.5 to 88.0. Weakening business confidence could signal a deterioration in macroeconomic conditions, leading to a reduction in spending and hiring, and ultimately affecting consumer confidence and spending.
Looking ahead, the ECB bank lending survey, US consumer confidence index for July and German business confidence data will set the tone for the pair. However, investors will focus on the monetary policy meetings of the US Fed and the European Central Bank.
Technical analysis and scenarios:
Technical analysis of the EUR/USD pair shows that it is currently trading around 1.10800. Support levels to watch out for are at 1.10200, 1.09700 and 1.09000, while resistance levels are at 1.12500, 1.11900 and 1.11300. The Alligator indicator indicates bearish sentiment on the pair, with a wide open jaw indicating a strong downtrend. The placement of the blue line (jaws) above the green (lips) and red lines (teeth) further reinforces the bearish outlook. Meanwhile, the Awesome Oscillator (AO) and Accelerator Oscillator (AC) are in green, signaling a buying opportunity.
Main Scenario (BUY)
Recommended entry level: 1.11300.
Take Profit: 1.11900.
Stop Loss: 1.10900.
Alternative scenario (SELL)
Recommended entry level: 1.10200.
Take Profit: 1.09700.
Stop loss: 1.10600.