EUR/USD Daily Forecast – Euro Falls Below 1.1300

EUR/USD Weighed by a Stronger Dollar

The US dollar is the strongest major currency in the week thus far. The greenback has gained the most against the Swiss franc among the major currencies. Meanwhile, the loonie has limited losses to around 0.2% for the week versus the dollar.

The single currency falls somewhere in the middle of that list. But nevertheless, the decline in EUR/USD in the early week is attributed to a stronger dollar. Some of this strength is because of news over the weekend of a trade truce between China and the United States. I also think that last weeks Fed speeches have taken the wind out of the earlier rally in EUR/USD that we saw in the second half of June.

European data falls short of expectations.

Retail sales figure released out of Germany today were reported to decline by 0.6% in May versus an expectation for a rise of 0.5%. There was an upward revision for the prior month to -1% from the initial reading of -2%.

Spanish unemployment figures showed a decline of roughly 64 thousand unemployed people in July. This was below the analyst expectations for a drop of 90 thousand and follows a decline of about 84 thousand in the prior month.

Technical Analysis

EUR/USD seems to be gaining downside momentum in the early week. The pair has already fallen below an important confluence of support near 1.1350 that marks a horizontal level, the 200-day moving average, and the 200-week moving average.

The US dollar index (DXY) has also scaled above its 200-day moving average. I think this should set up a good opportunity to short the dollar but at this stage, there has not been enough evidence that a bottom is in for EUR/USD.

The next area of support that I am watching falls a 1.1365. That horizontal level provided significant resistance in the near past. Beyond that, there could be scope for a test of support at 1.1237. This level seems to have a lot of confluence and I expect that it will hold buyers if we get there.

Bottom Line

• EUR/USD has not shown signs of bottoming. I think it remains a sell on rallies in the short-term
• From a broader perspective, the pair continues to look like it wants to push higher. The current decline may offer a swing setup to try a long position.