The euro demonstrated gains in the EUR/USD investing session, driven by a slight increase in the euro area GDP report. Industrial production on a month-on-month basis added to the positive sentiment. However, year-on-year figures exceeded expectations but contracted by 1.2%.
US Economic Data and Market Impact
In contrast, the US witnessed mixed building permit data, with housing starts surpassing forecasts but permits falling short. Industrial production, after two consecutive months of decline, showed an uptick alongside a rise in manufacturing production. The strong US economic data, combined with robust retail sales figures from the previous day, might influence the Federal Reserve’s decision to maintain higher rates due to the persistent strength of the US economy.
FOMC Minutes and Technical Analysis
The focus later shifts to the FOMC minutes for any indications regarding monetary policy. In terms of technical analysis, the daily EUR/USD chart indicates a potential downside as several candles display long upper wicks. The formidable US economic data challenges the EUR swap rates’ defence of the psychological 1.0900 level. A breach could prompt a test of the support within the upward channel.
EUR/USD Under Pressure in Risk-Averse Environment
The EUR/USD pair remains under pressure, hovering just above the 1.0900 threshold in a subdued session marked by risk aversion. While concerns about China’s economic troubles persist, the market also evaluates inflation data’s impact on central bank decisions and monitors the global economy’s vulnerability.
Market Sentiment and Future Outlook
Asian shares dipped due to worries about China, though the EUR/USD investing index showed slightly more optimism upon returning from a holiday. US Treasury yields pulled back, with the 10-year note at 4.21% and the 2-year note at 4.93%. Despite this, the US Dollar continues to exhibit strength across the FX board.
Data Releases and Fed’s Path in The Euro Zone
US Building Permits and Housing Starts for July also came into play, with 3.9% and 0.1% increases respectively. Looking ahead, the US will unveil July’s Industrial Production and Capacity Utilization data alongside the publication of the July FOMC meeting Minutes. Market players eagerly await signs of whether the Federal Reserve will pause its tightening cycle in September.
Technical and Short-Term Outlook
From a technical standpoint, the EUR/USD investing may approach the 1.0800 price zone. On the daily chart, advances around the 100 Simple Moving Average (SMA) are being rejected by sellers. The 20 SMA trends are lower than the longer ones. The momentum indicator signals a potential uptick but remains below its 100 level. The Relative Strength Index (RSI) sits around 41, implying a consolidative phase with downside risk.
The 4-hour chart reinforces the bearish sentiment as EUR/USD struggles to surpass a bearish 20 SMA. Technical indicators hint at a downward extension if the pair breaches the immediate support level at 1.0870.
