The Bears take control and aim for another leg down south

EUR/USD Current Price: 1.1083

• German inflation fell more than expected in August, rising 1.9% from a year earlier.
• The United States revised Q2 Gross Domestic Product upward to 3%.
• EUR/USD at fresh weekly lows and technically poised to extend slide.

EUR/USD fell to 1.1072 on Thursday morning, only modestly retreating from the level and trading close to such a low before the United States (US) open. The US dollar gained momentum during European trading hours as sour sentiment dominated the first half of the day.

NVIDIA, the leading AI and chip giant, reported earnings after Wednesday’s close that beat expectations, but shares fell about 8 percent on the news. Analysts attributed the decline to the fact that revenue guidance for the current quarter missed some estimates, while the company reported that it was facing difficulties in developing a new generation of chips.

Asian indices closed in the red, but Europeans shrugged off the dour mood and held in the green, halting the USD’s advance.

On the data front, Germany released preliminary estimates of August inflation data, which surprised investors by falling more than expected. The consumer price index (CPI) rose 1.9% from the previous month, below the 2.1% expected, while the CPI fell 0.1% from the previous month. The Harmonized Index of Consumer Prices (HICP) rose 2.0% in the year to August and fell 0.2% from July.

Across the Atlantic, the US released initial jobless claims for the week ended August 23, which fell to 231,000, beating expectations. At the same time, the second estimate of Q2 Gross Domestic Product (GDP) was revised upwards to 3% from the previous estimate of 2.8%. Encouraging data provided further USD support.

EUR/USD short-term technical outlook

The daily chart for the EUR/USD pair suggests that there are several slides on the file. The pair fell for the second day in a row, leading to technical indicators heading firmly south, albeit still above their midline. The bearish momentum, however, remains the same. At the same time, the 20 Simple Moving Average (SMA) maintains its bullish slope, providing dynamic support around 1.1020. A break below the latter should fuel selling.

In the short term, and according to the 4-hour chart, the downward momentum has eased, but the risk remains tilted to the downside. Technical indicators are stabilizing near oversold readings, still far from suggesting bearish exhaustion. Meanwhile, the 20 SMA has dropped well above the current level, acting as dynamic resistance around 1.1145.

Support levels: 1.1065 1.1020 1.0985

Resistance levels: 1.1110 1.1145 1.1190