The euro currency continues to trade towards its year-to-date low against the US dollar as fears over the COVID-19 Delta variant, weaker eurozone PMI data, and the recent dovish ECB meeting harms sentiment towards the single currency.
Additionally, the US dollar index trades towards the best levels of the year, keeping the EURUSD pair until pressure. It is highly likely that a major directional move in the greenback is going to come after this week’s FOMC policy decision.
Last Friday the IHS Markit Euro Area Manufacturing PMI fell to 62.6 in July of 2021 from a record high of 63.4 in June, compared to forecasts of 62.5. It is the lowest reading since March, although it should be noted that the Manufacturing remains in expansion while above 50.
Slower growth was linked in many cases to worsening supply lines and shortages of inputs although new orders remain elevated, while inflation in the manufacturing sector was unchanged at record highs as output cost rose at a near record pace
In the near-term, the EURUSD is showing signs that a bounce could happen at any time as the RSI, MACD and Momentum indicators have formed significant amounts of bullish price divergence.
In terms of current sentiment, the ActivTrader market sentiment tool shows that sentiment has neutralized since last week. This is a good sign for bulls, and even more so if sentiment continues to dip.
The ActivTrader market sentiment tool shows that bullish sentiment is now at 54 percent, marking a 6 percent drop. If the herd starts to actually turn bearish it could be time for the EURUSD to rally.
EURUSD Short-Term Technical Analysis
The EURUSD pair continues to show that a large falling wedge pattern has formed during the recent price drop, with nulls needing to rally above the 1.1820 level to activate the bullish reversal pattern.
To the downside, a break under the 1.1750 level could see the EURUSD pair testing the yearly low, around 1.1705. I currently favour the bullish scenario rather than the bearish scenario.
EURUSD Medium-Term Technical Analysis
Looking at the daily time frame, significant amount of bullish RSI, MACD price divergence has formed and continued to project a coming rebound above the 1.1900 level.
It is noteworthy that the EURUSD pair is likely to see the next big breakout on the daily time frame once we see a daily price close on either side of the 1.1705 to 1.1845 price range.