Growing fears of another Fed rate hike are buoying the US dollar.
Eurozone macro data continue to point to an economic slowdown.
EUR/USD breaks 1.0700 level and maintains downtrend.
The US dollar maintains its recent strength EUR/USD is trading below the 1.0700 line for the first time since early June. Financial markets are looking for safety on Thursday as generally strong macroeconomic data out of the United States (US) and fears that the Federal Reserve (Fed) could raise interest rates again in November keep investors cautious and support the US currency.
In the meantime, the euro has been affected Downward revision of gross domestic product (GDP) for the second quarter EU, to 0.1% qoq from a preliminary estimate of 0.3% qoq. The year-on-year comparison was confirmed at 0.5%, which is below the previously calculated 0.6%. Aside from that, German industrial production shrank by 0.8% month-on-month in July and 2.1% yoy, worse than expected.
At the same time, The stock markets cannot lift their heads. The Federal Reserve’s Beige Book, released on Wednesday, reported that many companies expect wage increases to slow in the near future, which is generally positive. However, several Federal Reserve officials somewhat confirmed the fears when the President of the Federal Reserve Bank of Boston, Susan Collins pointed out that further adjustments may still be needed. In addition, a former member of the Federal Reserve, James Bullard said another rate hike was likely Year. Still, it’s worth noting that Bullard left the Fed to pursue education. Several Fed speakers are scheduled for today, whose words could create additional demand for the US dollar.
Ahead of the Wall Street opening, the US released initial jobless claims for the week ended September 1st. The number rose by 216,000, well above the expected 234,000. In addition, the country released second-quarter non-farm productivity rising 3.5%, below the 3.8% expected, and unit labor costs for the same period rising 2.2%, ahead of expectations.
EUR/USD short-term technical outlook
The pair’s daily chart EUR USD advocates downward expansion. The pair has extended its decline below all of its moving averages and the 20 simple moving average (SMA) is trending significantly lower below the longer ones, reflecting growing selling momentum. At the same time, technical indicators are gaining downside power inside negative levels, with no signs of bearish exhaustion and no room for their declines to be extended.
The short-term prospects are also pessimistic. Technical indicators fell sharply on the 4-hour chart with the RSI maintaining its downtrend around 25. The momentum indicator is also moving south towards negative levels, sloping almost vertically in line with looming lower lows. Finally, a sharply bearish 20 SMA extended its decline below the also bearish longer moving averages and provided dynamic resistance around 1.0750.
Support Levels: 1.0670, 1.0630 and 1.0595
Resistance Levels: 1.0720, 1.0755 and 1.0790