Investing.com – The hesitation is gaining ground on the EUR/USD pair, which has been unable to mark new highs or new lows yesterday, despite movements in both directions.
Recall that the Euro had been penalized yesterday morning by the disappointing figures for German industrial output for the month of June, fueling fears of a recession for the first economy of Europe.
A drop in the Dollar was then allowed EUR/USD to bounce back. It should be noted that the greenback’s weakness seemed to be in part related to the tweets of US president Donald Trump, who has again put pressure on the Fed for more rate cuts ” stronger and faster “.
Technical thresholds to monitor on the EUR/USD
However, the Euro had halted the rise before the summit, Monday to 1.1250, and then slightly declined. Because of this, the recent fluctuations of the Euro-Dollar formed a triangle, visible in hourly data, figure chart confirms the short-term uncertainty.
For this uncertainty dissipates, it is necessary that the pair breaks above 1.1240-50, or falls below 1.1160-70.
A break above 1.1250 would target 1.1280 and 1.13. Under 1.1160-70, an area where the moving average 100 hours, the attention will turn to the moving average 200 hours to 1.1145, and then to 1.11, 1.1025, and 1.10.
Attention to the impact of the trade war
With an economic calendar is almost empty, which will not be the opportunity that inscriptions weekly unemployment US, the market’s attention will remain focused on the war commercial in regards to the fundamental factors.
The escalation of the trade war is fuelling expectations of a rate cut from the Fed, which weighed on the Dollar. Thus, the information worrying in regards to the relationship China-USA are the upside for EUR/USD, while a possible improvement of the situation would set back the likelihood of the Fed to lower rates further, and could weigh on EUR/USD.
Anyway, the market expects with a near-certainty that at least two more rate cuts by the end of the year, and several banks are of the same opinion.
Goldman Sachs (NYSE:GS) has announced on Monday dropped its forecast for trade agreement China-USA before the presidential US, and has accordingly increased its rate cut expectations, providing a further 2 drops of 0.25% by the end of the year, with a probability of 75% of a new rate cut from the FOMC meeting in September.
Finally, we note that ING (AS:INGA) has posted a forecast similar to today, explaining why it now provides for a rate cut in September, and another in the month of December :
“The risks to growth and inflation are increasingly tilted to the downside following the last rise in commercial exchanges. With the aggressive easing by other central banks, this may exacerbate the upward pressure on the u.s. dollar, which could further dampen growth and inflation and increase pressure on the Fed to loosen its policy.”