EUR/USD Daily Price Forecast – EUR/USD Holds For At 1.155 Handle as German Data Missed Estimate

The EUR/USD pair spent the Asian hours on Monday in a tight range near the 1.1560 handle but came under a renewed selling pressure during the European trading hours as the data from Germany missed market expectations by a wide margin and was weighed down by worries that Italy could ramp up spending and challenge European Union budget regulations and by a drop in June German industrial orders. After touching its lowest level in five weeks at 1.1530, the pair retraced the majority of its daily losses in the NA session and is currently trading flat at 1.1555 up 0.01% on the day. The data released by the Deutsche Bundesbank on Monday revealed that factory orders contracted by 4% on a monthly basis in June following May’s 2.6% expansion and fell short of analysts’ estimate of -0.4%. Commenting on the data, the new drop in orders in July indicates that the weakness in production has continued moving into Q3. Besides the drop in orders in June, earlier published surveys for July had also signaled ongoing weakness in Germany’s manufacturing sector.

U.S.-China Trade Conflict Offset Positive Leads From Earnings-led Gains on Wall Street

On the other hand, the Eurozone Investor Confidence Index released by the Sentix GmbH improved to 14.7 in August from 12.1 in July to surpass the market expectation of 13.5, but failed did little to nothing to help the shared currency retrace its losses. In the second half of the day, the greenback lost its bullish momentum and allowed the pair to stage a modest recovery. The US Dollar Index, which advanced to its best level in more than a month at 95.52, is at 95.37, up 0.01% as of writing this article. Asian stocks wobbled on Tuesday as simmering worries over the U.S.-China trade conflict offset positive leads from earnings-led gains on Wall Street. Some analysts see the trade conflict benefiting the U.S. dollar as the nation’s economy is better placed to handle protectionism than emerging markets, and as tariffs may narrow the U.S. trade deficit.

Today’s macroeconomic calendar will feature industrial production and trade balance figures from Germany, while JOLTS Job Openings and IBD/TIPP Economic Optimism from the U.S. will be looked upon for fresh impetus during the NA session. The demand for the EUR put options has risen sharply in the last few days. The one-month delta risk reversals (EUR1MRR) have dropped to -1.05 (the lowest level since June 19) vs. -0.55 seen on July 31, indicating a pick-up in demand or implied volatility premium for the EUR puts (bearish bets). The data add credence to the pennant breakdown seen on Thursday and suggests the investors are expecting a deeper drop in the spot. The immediate support at 1.15 could be put to test today if the German industrial production prints below the forecast of a 0.5 percent month-on-month drop. The common currency could also take a beating if the fears of the Italian debt crisis push the 10-year Italy-German bond yield differential higher. Expected support and resistance for the pair are at 1.1500 / 1.1470 and 1.1610 / 1.1650 respectively.