The EUR/USD pair is trading flat, within the 9th figure. The sluggish battle continues: sellers of EUR/USD are trying to pull the price below the target of 1.0900, while buyers refuse to give up as they try to return to the middle of the 9th price level, to the resistance level of 1.0950 (Tenkan-sen line on the daily chart). Both sides appear to be losing – upward momentum (as well as downwards ones) fade away as soon as they start. The fundamental background is also contradictory, although overall, in my opinion, it still favors the greenback.
During the European session on Wednesday, the euro area published the second estimate of its GDP report. No surprises here: the second estimate matched the initial one. The European economy grew by 0.3% in the second quarter compared to the first quarter of 2023. Compared to the second quarter of 2022, the eurozone economy increased by 0.6%. Most experts were pessimistic: according to initial forecasts, the indicator was expected to increase by 0.1% quarterly and by 0.4% annually. Considering the fact that the second estimate of the indicator matched the initial one, we can say that the European economy is slowly but surely recovering. Remember – in the fourth quarter of 2022, the eurozone's GDP decreased by 0.1% QoQ, in the first quarter of 2023, the economy remained unchanged.
We also received data on eurozone industrial production for June. On a monthly basis, the indicator grew by 0.5%, contrary to forecasts of a 0.1% decline. In annual terms, the indicator also came out in the "green", although it remained below zero (-1.2% with a forecast of -4.2%).
Such news flow helped buyers of EUR/USD to build on a small corrective growth – to the 1.0935 mark. However, at the start of the US session, the pair sharply turned down and lost all the positions it gained.
Take note that the drop to the base of the 9th figure was not due to any specific "sensational" news event. The trigger was a secondary report that was published in the US at the start of the US session. US housing starts increased more than expected in July. Overall housing starts increased 3.9% after a significant decline (almost 12%) in June. Building permits edged up by only 0.1%. Although it's just a small growth, take note that the gauge fell by 3.7% in June.
Under any other circumstances, these reports would not have made any impression on the market. But at this moment, circumstances are such that the market is focused on these reports, thereby, supporting the dollar.
A little later, another economic report was published, which also acted as the greenback's ally. In July, total US industrial production increased 1.0% – the best result since January 2023. Manufacturing output was up by 0.5% (compared to forecast of no growth). July US capacity utilization was 79.3% against the expected 79.0%.
The US economic reports helped the bears to return the pair to the base of the 9th figure (and even test the support level of 1.0900). However, the indecisiveness – from both buyers and sellers of the pair – stopped the downward momentum.
What does this mean? First and foremost, it means that the sideways movement persists. The current news flow certainly provokes some volatility, but price fluctuations are contained within a relatively narrow price range. And if in early August the boundaries of the price range corresponded to the 1.0900-1.1050 marks, recently this range has noticeably narrowed – in particular, bulls are no longer trying to attack the 10th figure: this week's high is 1.0961 (while last week the bulls of the pair marked at 1.1060), low at 1.0876.
Traders do not want to risk opening large positions on the pair (especially longs), preferring sprint bursts to long distances. By taking profits when approaching the conditional borders of the price range (currently it's 1.0900 – 1.0960), traders stop both upward and downward momentums, causing the pair to move essentially in a circle.
Market participants need a powerful news event that would allow one side to take the initiative – to take, so to speak, the reins of power into their own hands. Considering the fact that this week's economic calendar is not saturated with important releases (perhaps the FOMC minutes may surprise us, but this is unlikely), we can assume that in the medium term the EUR/USD pair will stay within the boundaries of the 9th figure. At the same time, sellers will probably continue to try to pull the price below 1.0900. We should be cautious with such movements: you should only consider short positions after the bears break through the support level of 1.0860 – this is the lower line of the Bollinger Bands, coinciding with the lower border of the Kumo cloud on the 1D chart.