Fundamental Drivers
Eurozone
The Eurozone economy has shown signs of recovery, as evidenced by a 0.3% quarter-on-quarter increase in GDP for the second quarter, surpassing market forecasts. In addition to this positive economic performance, sentiment towards the euro has been bolstered by geopolitical factors. Notably, optimism has emerged regarding the potential for a peace agreement between Russia and Ukraine, following the Trump-Putin summit in Alaska. The prospect of a ceasefire is anticipated to lower energy prices and enhance business confidence throughout Europe.
United States
In the United States, inflation data has played a significant role in shaping market expectations. The July Producer Price Index (PPI) rose by 0.9% on a month-over-month basis and 3.3% year-over-year, representing the highest monthly increase observed over the past three years. This surge has tempered expectations for aggressive interest rate cuts by the Federal Reserve, though the possibility of a 25-basis-point reduction in September is still being considered. Meanwhile, the US dollar is experiencing some pressure due to moderate demand for risk assets and ongoing profit-taking activities.
Technical Analysis
Support and Resistance Levels
Key support levels for EUR/USD are identified at 1.1650, 1.1570, and 1.1500, with a short-term rebound zone between 1.1637 and 1.1645. On the resistance side, primary levels are set at 1.1740, 1.1810, and 1.1900. The short-term target stands at 1.1789, which aligns with the 100% Fibonacci retracement level.
Technical Indicators
• RSI: The Relative Strength Index is currently around 55, suggesting a neutral momentum in the market.
• MACD: The Moving Average Convergence Divergence indicator is turning upward, indicating the potential for bullish momentum.
• Stochastic Oscillator: This indicator is moving downward from overbought territory, pointing to a possible short-term cooling in price action.
Trading Scenarios
Bullish Setup
A bullish trading opportunity arises for buy positions above the 1.1620–1.1650 range. The initial target is set at 1.1730, with a further target of 1.1830 if US economic data proves weak. A stop-loss should be placed below 1.1580 to manage downside risk.
Bearish Setup
For bearish scenarios, sell positions are considered below 1.1580, particularly if profit-taking accelerates or if there is disappointing economic data from the Eurozone. Targets in this case are 1.1500 and 1.1385, with a stop-loss positioned above 1.1675.