Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

The EURUSD continued its recovery on Monday despite the report that showed that the German producer prices dropped more than expected in July. The producer price index fell by 1.1%, while economists had forecast a 0.2% decline. The drop in producer prices suggests that the German economy is slowing down, which could weigh on the Euro. 

The currency pair is also weighed by the hawkish tone of Federal Reserve officials. Fed Chairman Jerome Powell said on Friday that the central bank is “strongly committed” to bringing inflation under control. This suggests that the Fed could continue to raise interest rates, which would make the dollar more attractive to investors. 

Despite the “hawkish” remarks from the Fed Chair, the greenback declined on Monday as the market turned its attention towards the Jackson Hole due later this week.  

Technische Analyse 

The pair is displaying a potential reversal pattern on the 4-hour chart, with the current price at 1.09162 indicating a break above a falling wedge formation. This breakout is coupled with a rising RSI at 53.75, suggesting strengthening bullish momentum.  

The price is currently above the daily pivot point and moving towards the 50-EMA, which stands as a significant resistance level. However, the declining volume could indicate a lack of strong conviction behind the current move. If the bulls manage to sustain this breakout, their next challenge lies at the 50-EMA. A successful push above it could open doors for further gains towards the 1.09528 and 1.10239 resistance levels.  

For a bearish scenario, failure to maintain the upward momentum might lead to a retest of the breakout level at 1.08791. A breakdown below this level could expose the 1.08448 and 1.07854 support levels in the short term. 

Zusammenfassung 

EURUSD is likely to remain under pressure in the near term as the Eurozone economy slows and the Fed hints at the continuation of the current tightening cycle. However, should the bulls sustain a push above the 50-EMA, the 1.09528 resistance level is likely to act as a level of interest in the short term. 

Quellen: TradingView, Reuters, Trading Economics, Federal Statistical Office

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