The EURUSD currency pair continues to move along with the short-term downtrend from the July high. At the end of the month, the euro is likely to grow against the dollar, but the extent of this strengthening is going to be quite modest. By now, the bulls have already lost more than half of July gains, and by the end of the month’s last trading session the situation may get even worse. The next target level for EURUSD sellers is 1.078.
On Tuesday, we observed an attempt to boost the euro against the dollar, but this initiative quickly came to naught. As an argument, traders tried to use the EU GDP data for the second quarter, which turned out to be stronger than expected. Nevertheless, analysts and economists did not attach much importance to this fact. In their opinion, the indicators of several countries inflated the pan-European data, which, when considered in detail, is not optimistic.
The main reason for the quarterly growth of the EU economy by 0.3% rather than the expected 0.2% was Spain, whose GDP increased by an impressive 0.8%. At the same time, the indicators of France (0.3%) and Italy (0.2%) corresponded to forecasts, and the German economy was once again declining (-0.1%). ING analysts believe that the situation is not expected to improve in the third quarter, and the impact of the Olympics on French GDP growth will be moderate and short-term.
Against this backdrop, BCA Research experts predict persistent economic difficulties for the EU and recommend currency market participants to sell euros. In their opinion, the ECB’s actions to ease monetary policy already seem overdue and are unlikely to prevent recession. At the same time, external shocks can further worsen the situation in the European economy. Representatives of BCA Research advise currency market participants to keep a “defensive” position in dollars and sell euros.
The RSI indicator on the daily chart of EURUSD keeps moving downwards without showing any signs of reversal. It provides favorable conditions for the price to reach the level of 1.078.
The following trading strategy can be suggested:
Sell EURUSD at the current price. Take profit – 1.078. Stop loss – 1.087.
Traders can also use a Trailing stop instead of a fixed Stop loss at their discretion.
