This week is particularly saturated with news and events. The key piece will be the ECB meeting on Thursday, July 25, followed by the publication of important EU economic reports. EUR will remain under pressure due to the expectation of the ECB to introduce additional stimuli and counter the risks caused by the stressed international trade relationships. Earlier, Mario Draghi, the head of ECB, stated that the additional stimuli will be necessary “if there is no improvement” in the growth and inflation forecasts. One of his suggestions was lowering the key interest rate. His comments caused the Italian government bonds to fall by 100 points and weakening of the EUR by 2%.
The latest economic reports from the EU have been particularly weak. Harmonized Consumer Price Index was only slightly better than the market expectations and reached 1.3 (year to year) instead of the original target of 2%. In July the economic mood index ZEW in Germany lowered to the two annual levels and reached -24.5. Some economic activity indices also were characterized unusually.
Currently, most experts consider that on this meeting the ECB will keep the key monetary policies at the same level — the key deposit rate at -0.40%, the margin lending rate at 0.25%, the interest rate at 0%. Keep an eye on the comments by the ECB representatives that may influence the situation on EUR/USD greatly.
Current technical picture on EUR/USD currency pair
- Support levels: 1.11550, 1.11200, 1.11000
- Resistance levels: 1.12000, 1.12450, 1.12800
- - the price fixed below 50 МА и 100 МА;
- - the MACD histogram is in the negative zone and keeps falling
EUR/USD shows a negative trend, the trading instrument has reached and overcome the round 1.12000. The key support and resistance levels are 1.11550 and 1.12000. The EUR can descend further, the trading instrument has created the classic Head&Shoulders figure on the H4 timeframe, which points to the bearish mood. The indicators point to the power of the sellers too:
Still, we suggest you open positions from the key levels.
If the price falls below 1.11550, expect further descend toward 1.11200-1.11000.
Alternatively, the quotes can recover toward 1.12400-1.12600.
Seek entry points and confirmations on smaller timeframes. Use a trailing stop to follow your orders.
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