The EUR/USD currency pair is building on its gains from Friday. Now, it’s working hard to return above the all-important 1.1600 level. Recent economic reports have fueled fears that the investor sentiment in the Eurozone may have reached its peak. What’s at stake This high-level deficiency could have long-lasting effects on the pair’s trajectory in the short-term.
With other data released earlier on, Eurozone Sentix Investor Confidence taking a surprise dive in August. It plunged to -3.7, a decline from a positive advance of 4.5 in July. This record drop reflects increasing concern among investors about the direction of economic activity in the area. Such sentiment can be a real drag on the euro, making it tougher for the euro to gain ground against the US dollar.
Market participants are hoping for some good news today with the release of Factory Orders in June in the US, which is being anxiously awaited. They expect a contraction following the stunning 8.2% advance first reported in May. This new data to come may have an even greater impact on the EUR/USD exchange rate, as traders look for macroeconomic trends.
EUR/USD is currently exhibiting very range-bound price action on the 4-hour chart. This additional layer threatens to weigh down its attempts to reclaim traction above the heavily psychological 1.1600 area. The currency pair traded above this watershed during Asian trading hours, before finishing below this key level. The narrow trading range indicates that neither buyers nor sellers are willing to make a strong commitment in either direction right now.
To build a more positive view, EUR/USD needs to rise above the 1.1600 level convincingly. Analysts note that gains beyond this level would likely tilt risks to the upside for the currency pair in the near term. On the other hand, a failure to reclaim this crucial level would likely see traders growing more bearish once again.
The major technical indicators do help identify key levels of support and resistance that traders should keep an eye on. The 100 Simple Moving Average (SMA) for EUR/USD is currently near 1.1370. If the pair remains to the downside, this level might make a good launching pad. Market participants are looking at the 20 SMA, which sits at approximately 1.1640. This level serves as a potential resistance level and shapes their decisions to go long with a potential entry/exit plan.
Support levels are seen at 1.1545, 1.1505, and 1.1470. Should the pair experience downward pressure, these levels could come into play as critical indicators of market sentiment and potential reversal points.