EUR/USD: Bearish despite positive IFO data

EUR/USD reached a European session peak of 1.0995 on the back of positive IFO data, but then weakened and slid to the 1.0970 zone. Although the Ifo Business Climate Index for Germany fell to 108.3 in July 2016 from 108.7 in June, it beat market expectations of 107.5, as the mood among manufacturers and wholesalers deteriorated while constructors and retailers' sentiment improved. The survey of future expectations fell to 102.2 from 103.1 in June while the current conditions index edged higher to 114.7 from 114.6.

Technical Insights:



Short term (15min) chart of EUR/USD:

Trend Analysis: Bearish (50 SMA below 200 SMA).

Levels Analysis: Critical support zone at 1.09520 - 1.09560 and resistance zone at 1.09660 - 1.10020.

Takeaway: Both moving averages are showing a bearish momentum, and the price is trading within a descending wedge pattern. Technical wise, I expect the price to pull back to the critical resistance zone of 1.09960 - 1.10020, confluence with the upper downtrend line by the descending wedge. In addition, the neckline of the inverted Head and Shoulder pattern has also been broken up at the 1.09800 level, which is also a sign that the price may continue to go up in the short term.



Long term (Daily) chart of EUR/USD:

Trend Analysis: Bullish (50 SMA above 200 SMA).

Levels Analysis: Critical support at 1.09130 and resistance at 1.11790

Takeaway: Although bullish in a long-term perspective with the 50 SMA above 200 SMA, both moving averages are turning downwards, which may lead to a formation of the death cross. Price action is also bearish with the 6 months uptrend line broken. According to the measure rule for price projection of trendline mirror, I expect the price to continue its descent down to the 1.06280 level. In the short term, the support level at 1.09130 is critical to note.