The EUR/USD currency pair failed to stop its Friday's sharp declines and remain depressed near below 1.1800 level, having hit the low of 1.1760 level mainly due to the broad-based U.S. dollar latest recovery moves, supported by the Friday's better-than-expected employment report. However, the U.S. dollar gains could be limited or short-lived as uncertainty remains about the U.S. economic recovery.
On the other hand, the latest Bank of France economic forecasts confirmed that the euro economy contracted in line with expectations in the 2nd-quarter of 2020, which tends to undermine the shared currency and contributed to the currency pair losses. At the moment, the EUR/USD currency pair is currently trading at 1.1768 and consolidating in the range between 1.1760 - 1.1801.
It is worth recalling that the "French economy in July dropped 7% below the level expected had there been no coronavirus crisis." Whereas, "The euro zone's 2nd-biggest economy contracted 13.8%, in line with its forecast." On the contrary, "The manufacturing industry capacity utilization in July increased 3 points to 72%." In the meantime, the Bank of France economic predicted that the "Manufacturing and service sector activity would be stable in August."
The upbeat market sentiment got any additional boost after U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin showed a willingness to resume stimulus negotiations. However, the equity market gains were being supported by the positive outcome from the U.S. nonfarm payrolls on Friday. The NFPs increased by 1.763 million in July against 1.480mn expected and +4.79mn in June. In contrast, the unemployment rate fell to 10.2% from 11.1% in June, now some way below the record high of 14.7% in April.
As a result of the upbeat U.S. data, the broad-based U.S. dollar succeeded in gaining some positive traction. Still, the U.S. dollar's bullish bias is expected to be short-lived as doubts remain about the U.S. economic recovery amid on-going coronavirus cases. However, the gains in the U.S. dollar became the key factor that kept the currency pair lower. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies dropped by 0.11% to 93.308 by 10:16 PM ET (3:16 AM GMT).
On the other hand, the on-going tension between the United States and China keeps challenging the risk-on market sentiment and may support the U.S. dollar to put the safe-have bids. It is worth reporting that the U.S. President Donald Trump gave the American citizens warning to stop doing business with Chinese apps such as TikTok and WeChat. On the other hand, the U.S. president Trump add fuel to the fire/flames while imposing sanctions on senior Hong Kong and Chinese officials, including Hong Kong's Chief Executive Carrie Lam, during last week. These gloomy updates could halt the equity market's upticks and provide further support to the currency pair.
As we all well aware that there are no major data in the Asian session on the day, which will keep the market light ahead. However, the market traders will keep their eyes on the USD price dynamics and coronavirus headlines, which could play an important part in changing the intraday momentum. As well as, the traders will keep their eyes on the virus updates and news concerning China.
Daily Support and Resistance
S1 1.1606
S2 1.1702
S3 1.1744
Pivot Point 1.1797
R1 1.1839
R2 1.1893
R3 1.1988
On Monday, the EUR/USD pair has violated the upward trendline support level on 1.1810 level, and the formation of candles below this level can drive more selling in the EUR/USD pair. The EUR/USD pair can drop further until the next support area of 1.1704 level. Further breakout of 1.1704 level can drive more selling until 1.1640 level. On the higher side, the pair may find resistance at 1.1792, which is extended by the 50 periods EMA while the RSI also suggests a selling trend in the EUR/USD. Consider taking sell positions below 1.1792 level today. Good luck!