EUR/USD Bears Eye Sub-$1.0950 on German Stats and Fed Chatter

Highlights

• On Monday, the EUR/USD sits in the hands of German industrial production numbers early in the European session.
• However, FOMC member commentary will need consideration later in the day.
• The nearer-term technical indicators turned bearish, with sub-$1.0950 in view.

On Friday, the EUR/USD gained 0.54% to wrap up the day at $1.10080. German factory orders and the US Jobs Report delivered a bullish session.

After the surge in German factory orders in June, the market focus will turn to industrial production numbers this morning. Factory orders increased by 6.2% in May and 7.0% in June, suggesting a bounce back in industrial production. However, economists forecast industrial production to fall by 0.4%, aligned with the manufacturing PMI survey.

An unexpected rise in industrial production should ease recessionary jitters and support a EUR/USD run at $1.1050.

Germany is the production epicenter of the Eurozone. Weak manufacturing sector activity and output are bearish indicators, raising the prospects of an extended recession. A boost in industrial production could raise hopes of a turnaround in the economic outlook.

No ECB Executive Board Members are on the calendar to speak today, leaving chatter with the media to move the dial.

The US Session

There are no US economic indicators to influence the afternoon session. However, Fed chatter could move the dial.

FOMC members Bowman and Harker are on the calendar to speak today. References to the US Jobs Report, the latest Core PCE Price Index numbers, and the September Fed interest rate decision will draw interest.

With the markets betting on a Fed hold on interest rates in September, much can change this week. Hawkish Fed chatter and hotter-than-expected inflation numbers on Thursday could reignite bets on a 25-basis point interest rate hike. However, a more hawkish outlook could also raise the threat of an economic recession.

EUR/USD Price Action

Daily Chart

The Daily Chart showed the EUR/USD hover below the $1.1060 – $1.1015 resistance band. However, the EUR/USD held above the 50-day ($1.09741) and 200-day ($1.07918) EMAs, sending bullish near and longer-term price signals.

A EUR/USD move through the $1.1015 – $1.1060 resistance band would give the bulls a run at $1.11. However, a fall through the 50-day EMA ($1.09741) would bring the $1.0900 – 1.0850 support band into play.

Looking at the 14-Daily RSI, the 49.08 reading sends moderately bearish price signals. The RSI suggests a fall through the 50-day EMA to bring the $1.0900 – 1.0850 support band into view.

4-Hourly Chart

Looking at the 4-Hourly Chart, the EUR/USD sits below the $1.1015 – $1.1060 resistance band. The EUR/USD fell through the 50-day ($1.10029) and 200-day ($1.10020) EMAs, sending bearish near and longer-term price signals.

A move through the 50-day and 200-day EMAs would support a breakout from the $1.1015 – $1.1060 resistance band to target $1.11. However, a bearish cross of the 50-day EMA through the 200-day EMA would send the EUR/USD through the $1.0900 – 1.0850 support band.

The 14-4H RSI at 54.41 sends bullish EUR/USD price signals, with buying pressure outweighing selling pressure. Significantly, the RSI supports a breakout from the EMAs to target the $1.1015 – $1.1060 resistance band.