There is still room for EURUSD to reach the nearest support level

07 September 2023 145
There is still room for EURUSD to reach the nearest support level

The EURUSD currency pair continues to move within the downtrend from the summer high of 1.127. The upward rebound attempt made by the bulls at the end of August quickly came to naught. Technical indicators are gradually moving into oversold condition, but there are still no signals for a reversal. It is unlikely that the euro buyers will be able to seize the initiative before the EURUSD pair tests the lows of May-June near 1.067.


Recently the fall of the euro against the dollar accelerated due to the publication of data on business activity in the US service sector. According to ISM estimates, the services PMI rose from 52.7 to 54.5. These figures not only significantly exceeded the expectations of analysts (the forecast assumed a decline to 52.5), but also correspond to the maximum level of business activity since February.


In turn, the state of the European economy continues to deteriorate. Retail sales in August started to decline (-0.2%) after July's positive value of 0.2%. The situation is additionally aggravated by today's statistics on GDP of the EU countries. According to the final estimate, the European economy grew by only 0.1% in Q2 2023, while the initial data painted a more positive picture with growth by 0.3%.


Against this news backdrop, ECB officials are increasingly questioning the need for a new interest rate hike at the September 14 meeting. Traders estimate that the probability of further monetary policy tightening has fallen to 30%. Representatives of the central banks of France, Germany and Portugal believe a rate hike in October or December is possible, and are preparing to vote for a pause next week. The ECB's indecisiveness provides EURUSD with an opportunity to maintain a medium-term downtrend.


The obvious target for the currency market participants now is the movement of EURUSD to the level of 1.067. Reaching this mark will be a good opportunity for profit taking and at least a small upward rebound. Fundamental factors are not enough for a more significant rise in the euro against the dollar now.


The following trading strategy can be suggested:


Sell EURUSD at the current price. Take profit — 1.067. Stop loss — 1.077.

Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.

This content is for informational purposes only and is not intended to be investing advice.

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