The pair will likely continue higher as the bulls target the key resistance level to watch which will be at R2 at 1.035.
- Buy the EUR/USD pair and set a take-profit at 1.0350.
- Add a stop-loss at 1.0225.
- Lead time: 1-2 days.
- Set a sell stop at 1.0250 and a take-profit at 1.0200.
- Add a stop-loss at 1.0320.
The EUR/USD pair remained stable as the market reflected significantly weak data from Europe and the strong selling of the US Dollar. It reached a high of 1.0275, which was the highest level since June 5 this year. The pair is up around 3.5% from its June low.
Weak European data
The European economy has come under intense pressure in recent months as the crisis in Ukraine has continued. Data released on Monday showed retail sales in Germany fell at the slowest pace since records began in 1994. They were down 8.8% in June from the same month last year. Sales fell 1.6% over one month.
Other data showed that the manufacturing PMI in most European countries fell sharply in July. For example, in Italy, the PMI fell below 50. The European manufacturing PMI fell to 49.8 in July as companies continued to face significant challenges.
The situation will likely continue to deteriorate as gas prices in Europe continue to rise. Gas prices continued to rise as Russia continued to squeeze the region. On Sunday, the country stopped supplying natural gas to Latvia.
Europe now relies on LNG shipments from countries like Australia, the United States and Qatar. However, it is likely that supplies from Australia will start to decline as the country increases domestic consumption. Some parts of the country are expected to experience shortages if ongoing overseas sales continue.
The pair also rose as Italian government bonds rallied as fears of another debt crisis faded. The yield on Italian 10-year debt fell below 3% for the first time since May this year. At the same time, the spread between Italian and German bond yields narrowed to 2.2%.
The EUR/USD pair continued to rise as the US Dollar continued to fall. Analysts expect the Federal Reserve to slow its rate hikes as the economy slows significantly. Data released last week showed the country slipped into a recession in the second quarter.
The four-hour chart shows that the EUR/USD pair hit a high of 1.0276. This was a notable level as the pair struggled to break above this point several times in July. It is approaching the first level of standard pivot point resistance at 1.029.
It moved above the 25 and 50 day moving averages. The pair formed an inverted head and shoulders pattern. Therefore, the pair will likely continue higher as bulls target the key resistance level to watch will be at R2 at 1.035.
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