Euro Below 1.10000 – Can Buyers Attempt Bottom Fishing?

The Euro gained against the US dollar on Monday to $1.09866 after a widely watched German sentiment survey reported increased optimism among businesses after the Brexit vote.

The Munich-based IFO economic institute said its business climate index, based on a monthly survey of some 7,000 firms, fell to 108.3 in July from 108.7 in June. However, the data was stronger than the consensus forecast from economists. Forecasts had expected a reading of 107.7. The IFO infex is a leading indicator of economic health, as businesses react quickly to market conditions, and changes in their sentiment can be an early signal of future economic activity such as spending, hiring, and investment.

According to the director of the IFO institute – Dr Clemens Furst, the German short-term economic outlook seemed to be improving significantly. In particular, sentiment among manufacturers improved with regards to the present as well as short-term future outlook. However, over a third of the respondents surveyed, still expressed their concerns over the impact of the Brexit referendum’s result.

The US dollar was down today as investors stayed cautious ahead of the FOMC meeting this week. The Fed is not expected to tighten rates on Wednesday. Investors will be sifting through its statements for hints of a near-term rate increase following the recent strong of firm U.S. economic data that have revived tightening expectations.

The US dollar index, measuring the strength of the greenback against major currencies, was down 0.09% to 97.31 compared with the last settlement.

In data being watched, US Consumer Confidence, measuring the relative level of current and future economic conditions, will be released tomorrow. It is expected to reach a reading of 95.6 in July, down from June’s 98.0. Consumer Confidence is a leading indicator of consumer spending, which accounts for a majority of overall economic activity in the US.

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Fig. EURUSD Technical Chart

The euro has inched up against the US dollar today to hit 1.09889, bouncing back up from the lowest level in nearly a month. The –DI (red line) has begun to turn down towards the +DI (green line), suggesting that the bear market has become weaker. RSI is  at level 40, and is expected to boost the price upwards after some time spent trading sideways. EURUSD is expected to gain a little in the short-term, to test the resistance area of 1.10601. A potential reversal could happen (if it does) if the market fails at this resistance.

Trade suggestion

Buy stop at 1.09877, Stop loss at 1.09453, Take profit at 1.10286

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