The Markit survey found that private sector business activity in the Euro zone had dipped in July, but was still expanding, which many analysts showed it was holding up against the Greek crisis. Nevertheless, the Euro zone is set for only modest growth at best, with the Greece crisis not yet fully resolved. A fall in oil prices to near four-month lows also renewed concern that the ECB may struggle to raise inflation to its goal of just under 2%.
The moderately downbeat earnings mean that the US economy may not be strong enough to withstand a Fed rate hike. This week we will have the Fed rate decision, with most still believing it is too soon for a rate hike, while the vote itself may be considered a non-event, participants will be looking at the accompanying statement to see if there is any change of language.
Since the start of the year the currency fell more than 8.0% and is still in a bearish phase, trading below the 10-week moving average. Last week the EURUSD rallied and close in the green in near the high of the week but with a narrow range. The stochastic is showing light bearish momentum although is below the 50 mid line.
Expecting an upward move to a weekly key resistance at 1.1312 on a break above previous week high at 1.1018 (scenario 1) or a break below previous week low at 1.0808 could throw the currency to year lows at 1.0462 (scenario 2).