. EUR/USD: Mixed IFO Data Drives Decline - Capital Street FX

EUR/USD: Mixed IFO Data Drives Decline

EUR/USD: Mixed IFO Data Drives Decline

25 Jul 2023

EUR/USD Declines Toward 1.1050 After Mixed IFO Sentiment Data.

Introduction

In the aftermath of the German IFO survey, the EUR/USD faced downward pressure, falling towards the critical level of 1.1050. This article provides an in-depth analysis of the fundamental and technical factors influencing the EUR/USD pair’s recent movements. We will explore the impact of mixed IFO sentiment data on the Euro, the technical outlook based on daily chart analysis, and offer actionable trade suggestions.

Fundamental Overview

The EUR/USD exchange rate had initially rebounded towards 1.1100 during the Asian trading session but later changed course and dipped to its two-week low, hovering near 1.1050. A sustained closure below this level could pave the way for further selling pressure, leading to an extended downtrend for the currency pair.

The Euro’s resilience against the US Dollar earlier in the day was attributed to improved risk sentiment. However, this positive sentiment waned as the IFO Institute’s monthly poll on the business climate in Germany revealed concerning results. The Business Climate Index declined from 88.6 in June to 87.3 in July, falling short of the market forecast of 88.00.

Klaus Wohlrabe, the head of IFO surveys, expressed concern over the German Gross Domestic Product (GDP) and anticipated a contraction in the third quarter after analyzing the survey’s outcomes. This added to the prevailing recession fears, particularly following the disappointing Purchasing Managers’ Index (PMI) readings from both Germany and the Eurozone.

Moreover, investors were cautious ahead of the US Consumer Confidence Index statistics released by the Conference Board. These figures, to be published later in the day, could potentially influence investors’ positions in the run-up to the Federal Reserve’s interest rate announcement.

EUR/USD Technical Analysis – Daily Chart

Technical Overview

On the daily chart, EUR/USD is currently trading within a down channel, indicating a bearish trend. Furthermore, the currency pair remains positioned below all Simple Moving Averages (SMA), underscoring the prevailing bearish sentiment. The Relative Strength Index (RSI) suggests bearishness, while the Stochastic oscillator indicates a neutral trend.

Key Levels

  • Resistance Level: 1.1083
  • Immediate Support Level: 1.1037

How to Trade EUR/USD

Given the recent price decline, the EUR/USD pair seems to be favoring a bearish direction. With the currency currently trading near a significant support level, a breakdown below this level could trigger further downside potential.

Based on the technical analysis, a Sell signal is suggested for the EUR/USD pair.

Trade Suggestion

  • Entry: 1.1024
  • Take Profit: 1.0973
  • Stop Loss: 1.1067

Conclusion

The EUR/USD pair faced downward pressure towards 1.1050 following the release of mixed IFO sentiment data from Germany. The poor business climate index and recession fears added to the Euro’s bearish sentiment. Meanwhile, technical analysis indicates a bearish trend for the currency pair. Investors are closely monitoring the US Consumer Confidence Index statistics ahead of the Federal Reserve’s interest rate announcement. Based on these factors, the suggested trade leans towards a bearish stance, but traders should exercise caution and consider risk management strategies.