For the Euro, it’s a quiet start to the week on the Eurozone economic calendar. There are no eurozone economic indicators for the markets to take into account. The lack of data will leave the Euro in the hands of geopolitics and market sentiment towards Eurozone inflation and China’s economic outlook.
Earlier in the day, economic data from China generated a lot of interest. Industrial production rose 3.8% year over year, from 3.9% in June. Retail sales rose 2.7% year over year from 3.1% in June. The numbers disappointed, forcing the PBoC to act.
In Germany, wholesale inflation figures were also in the spotlight before the European opening. In July, wholesale prices rose 19.5% year-over-year, which was weaker than June’s 21.2%.
On the geopolitical risk front, markets will be watching China’s response to the arrival of US lawmakers in Taiwan.
At the time of writing, the Euro was down 0.21% at $1.02348.
In a mixed start, the euro hit an early high of $1.02683 before falling to a low of $1.02298.
EUR/USD needs to clear the $1.0274 pivot to target the first major resistance level (R1) at $1.0310 and Friday’s high at $1.03272.
After Friday’s reversal, EUR/USD may remain under pressure, with negative recession fears amid improving sentiment towards the US economy.
An extended rally would likely see EUR/USD test the second major resistance level (R2) at $1.0363.
The third major resistance level (R3) is located at $1.0452.
Failure to pass through the pivot would bring into play the first major support level (S1) at $1.0221.
In the event of an extended selloff throughout the day, EUR/USD would likely test the support at $1.020 and the second major support level (S2) at $1.0185.
The third major support level is located at $1.0096.
Looking at the EMAs and the 4 hour candlestick chart (below), this is a bearish signal.
At the time of writing, the EUR was sitting at the 100-day EMA, currently at $1.02320.
The 50-day EMA flattened on the 200-day EMA, the 100-day EMA flattened on the 200-day EMA, which were bearish price signals.
A EUR/USD move through the 50-day EMA (1.02476) would highlight the 200-day EMA (1.02660) and the R1 ($1.0310).
However, a drop in the 100-day EMA ($1.02320) would put S1 ($1.0221) into play. A narrowing of the 50-day EMA to the 100-day EMA would trigger red flags.
The American session
It’s a quiet day for the greenback. The NY Empire State Manufacturing Index numbers for August will be influential later in the day. With softer economic data, chatter from FOMC members will have to be watched.