Current trend

The EUR/USD pair is showing weak corrective growth, trying to recover from the predominantly "bearish" trading of the last week, as a result of which the single currency retreated from the local highs of early January. The instrument is testing 1.0920 for a breakout, while traders are expecting the emergence of new drivers of movement that could contribute to the development of upward dynamics in the near future.

Investors focused on German inflation data released last Friday: the Consumer Price Index increased from 0.1% to 0.3% month-on-month and from 2.2% to 2.3% year-on-year, while the Harmonized CPI increased from 0.2% to 0.5% and from 2.5% to 2.6%, respectively, which could act as a catalyst for upward price dynamics throughout the region. The data raise the prospect of European Central Bank (ECB) officials postponing further monetary policy adjustments, although most experts expect easing to continue in September. On Wednesday at 11:00 (GMT 2) the eurozone will release revised statistics on Gross Domestic Product (GDP) for the second quarter: the economy is projected to grow by the previous 0.3% quarter-on-quarter and 0.6% year-on-year. Investors will also be looking at Industrial Production data, which is expected to rise 0.7% in June after falling 0.6% in the previous month. Data on Employment Change in the second quarter will also be published: analysts expect it to decrease in quarterly terms from 0.3% to 0.2%.

In the US, inflation data will hit the market on Wednesday, which could adjust forecasts for possible easing of monetary policy by the US Federal Reserve in September: the Consumer Price Index in July is projected to slow down in annual terms from 3.0% to 2.9%, while in monthly terms it is expected to increase by 0.2% after –0.1% in the previous month. The Core CPI excluding Food and Energy is likely to adjust from 3.3% to 3.2% on an annual basis and from 0.1% to 0.2% on a monthly basis. In addition, according to the Chicago Mercantile Exchange (CME Group) FedWatch Tool, currently, it is expected that the interest rate will be reduced at the meeting of the American regulator on September 17-18 by 50 basis points at once with a probability of about 54.0%, and the probability of cutting the rate by 25 basis points reached 46.0%.

Support and resistance

Bollinger Bands on the daily chart show a steady increase. The price range expands, freeing a path to new local highs for the "bulls". MACD is declining keeping a weak sell signal (located below the signal line) Stochastic shows a more confident decline and is currently located approximately in the center of its area, which indicates sufficient prospects for the development of "bearish" dynamics in the near future.

Resistance levels: 1.0930, 1.0964, 1.1000, 1.1050.

Support levels: 1.0900, 1.0869, 1.0844, 1.0820.

Trading tips

Long positions can be opened after a breakout of 1.0930 with the target of 1.1000. Stop-loss — 1.0900. Implementation time: 2-3 days.

The return of a "bearish" trend with the breakdown of 1.0900 may become a signal for new short positions with the target at 1.0844. Stop-loss — 1.0930.