The EURUSD currency pair started this week with updating the monthly lows. However, the drop in quotes below the level of 1.09 attracted the bulls’ attention, who bought out a significant part of the drawdown. It can be assumed that many market participants consider the current prices appealing enough to buy euros and sell dollars. Today's news also contributes to some strengthening of the European currency.
The EU GDP and industrial production data were released on Wednesday. Economic growth fully met analysts' expectations (+0.6% year-on-year). However, the figures on industrial production were better than predicted for the first time since March. Europe's manufacturing sector increased by 0.5% year-on-year in July. In annual comparison, the decline in industry slowed down from -2.5% to -1.2%. Probably, the lowest point for the EU economy is left behind.
Today, on the other side of the Atlantic Ocean, the minutes of the last Fed meeting held on July 26 will be published. Although a lot of time has passed since then, market participants always pay attention to the official documents of the US financial regulator. Bloomberg economists expect to see in the minutes the easing stance of some Fed voting members.
Interestingly, the very strong US retail sales statistics released yesterday had little impact on the outlook for interest rates. A monetary pause at the meeting on September 20 still has a 90% probability. Clearly, something crucial has to happen to change these expectations dramatically. In theory, such an event could be Jerome Powell's speech at the annual conference in Jackson Hole next week. Until then, EURUSD has just enough time to rebound upwards.
The Stochastic indicator is approaching the oversold zone and should soon give a full signal to buy EURUSD. The nearest growth target will be the level of 1.1. Cancellation of this scenario is possible in case of price consolidation below the range of 1.085–1.09.
The following trading strategy may be offered:
Buy EURUSD in the range of 1.09-1.093. Take profit – 1.1. Stop loss – 1.085.
Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.