As of this week’s trading, the EUR/USD pair has gained minimal ground and is trading at the 1.1700 level. With rumors that one of China’s largest construction companies, Evergrande, was on the verge of defaulting and wreaking havoc on the country’s economy, the Dollar saw some transitory demand on Monday despite a dismal market environment. As the week ended, the market’s attitude improved as data indicated that Evergrande may be divided in three, as a section of the failing corporation pledged to complete an interest payment on time.
World Financial Expansion Is Under Peril
Speculation that Chinese officials are directing local authorities to brace for Evergrande Group’s probable collapse sent the stock market tumbling on Friday. However, the greenback stayed below the weekly high of 1.1683 per euro. Traders are concerned about a worldwide economic downturn triggered by a Chinese monetary crisis.
China’s central bank deemed cryptocurrency trading and associated services “illegal.” Beyond the financial industry, the remark will almost certainly aggravate the conservative tone set. While discussing fiscal policy, the Federal Reserve stated that economic development permits the banking sector to recover part of its considerable financial support. If all goes well, a reduction in bond purchases may be required shortly, the statement said.
It was apparent that lowering the US government’s huge stimulus program would not result in a rate hike. As a result, US Treasuries rates increased to their highest level. However, despite Lagarde & Co’s caution, the European Central Bank is concerned about inflation surpassing forecasts.
A Depressing Attitude Is Exacerbated By Tepid Data
August saw a 12.0% YoY increase in German producer prices. After a 99.4 rise in August, the IFO Business Climate Index fell to 98.8 in September, below Markit’s September PMI estimates. The German and EU statistics were good but fell short of market expectations. A 60.5 manufacturing and 54.4 services index dropped in the US.
The US Durable Goods Orders and CB Consumer Confidence were projected to climb 0.6% in August following a 0.1% decline in July. ISM Services and Manufacturing PMIs for September will be released shortly by the country. The EU and Germany will both announce September inflation statistics, as well as the EU’s Economic Sentiment Indicator.
EUR/USD Analytical Prognosis
EUR/USD CHART. Source: Tradingview.com
After two weeks of losses, the EUR/USD pair is nearing the annual low of 1.1663. As shown on the weekly chart, the pair is staying below a bearish 20 SMA, now at 1.1900. Momentum is building at 1.1600, with the 100 SMA crossing over the 200 SMA. Paradoxically, the Momentum indicator has risen from its lows, but remains in negative territory; while the RSI indicator continues to fall, now at 41.
This is because the pair is trading below all of its moving averages, which remain bearish, and technical indicators resumed their falls deep into negative territory. This year’s low is at 1.1663, and a break below it exposes the 1.1600 level. The next important level to monitor is 1.1520. It’s a 61.8% retracement of the last day’s gain. 1.1840 and 1.1900 are possible targets.