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Analysis
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The euro can’t seem to find any friends at the moment, succumbing to selling pressure against the dollar and pound. Not even hawkish remarks from Weidmann about the ECB having to tighten policy in order to counter inflation could stem the weakness. Heaping on the bearish factors was the ZEW Economic Sentiment Index which missed on the current conditions and standard reading too. We’ve got the final reading of July inflation data for Germany out tomorrow and UK Q2 GDP (which if really impresses) could add to the negative sentiment currently playing out in EURGBP. For EURUSD, a solid inflation print out of the US could raise tapering expectations putting further pressure on the cross. Let’s take a look at the charts now for potential tradeable opportunities.
EURUSD:
EURUSD has been on a strong descent post the NFP report as price was capped by the 21-day EMA and 1.185 horizontal resistance. The RSI peaked at key resistance around 52 and has now fallen quite substantially, bringing oversold conditions into view. The death cross divergence is widening further. My first target lower would be 1.17 (around the March 31 lows), below that the October and November 2020 double bottom lows around 1.16 would be the next pivotal level. On the upside monitor 1.18 and 1.185 (21-day EMA and horizontal resistance).
EURGBP:
EURGBP continues to push lower, now taking out the 5 April 2021 low of 0.847. Price is right on the lower trend line of the descending channel as well as horizontal support around 0.845. A breach of this would see us head towards 0.84 and from there the December 2019 and February 2020 lows of 0.83 would be on the scoreboard. The RSI is steadily declining on its way to oversold territory. On upside rallies I’d ben looking at shorting opportunities – using the 21-day EMA and resistance levels as guides. 0.85 and 0.855 are potential zones with some uplift of the RSI.
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