EUR/USD: outlook for August 1-7
EUR/USD finished last week around July highs in the 1.1170 area. The wait-and-see position taken by the European Central Bank and the decline in expectations of the Federal Reserve’s rate hike supported the pair.
Although the euro area’s economic growth slowed down from 0.6% in Q1 to 0.3% in Q2, the region moved away from deflation. Eurozone inflation rose to 0.2% in July from 0.1% in June as a result of higher food, alcohol and tobacco prices. Higher inflation reduces the chances that the ECB will ease policy. In addition, the results of the European bank’s stress tests were better than feared.
European economic calendar this week will be rather light. Final PMIs will be released on Wednesday and German factory orders will come out on Friday. US nonfarm payrolls should make trading on Friday volatile.
EUR/USD is currently trading at the top of the recent month’s range. On the daily chart the pair met resistance in form of the daily Ichimoku Cloud around 1.1180. Further resistance is at 1.1260 (top of the daily Cloud, 50% Fibonacci of May-June decline) – this level will be hard to break for the bulls. There’s also 2016 resistance line in the 1.1290 area. Support lies at 1.1105, 1.1075 and 1.1015.