EUR/USD witnessed a very flat session last night as the market took time to digest the hawkish Federal Reserve minutes. The Federal Reserve maintained that the economic reports for the US economy looked pleasing and could allow the Fed to raise the short term interest rates and also allow it to de-leverage its balance sheet. On the back of minutes the dollar traded higher against all major currencies and the Euro gave most of its gains from the morning. Traders would also be closely looking at the Jackson Hole economic symposium along with the slew of economic reports that would be expected out of Asia and the US with regards to Chinese PMI and unemployment reports from the US. According to many traders, any announcement of a further stimulus if coincides with the Federal Reserve raising interest rates would prove to be catastrophic for the currency pair.
On the daily charts for EUR/USD, the currency pair has been in a strong downtrend and has been forming lower lows and lower highs and witnessed a strong sell off on break of important support zone near the $1.33507 level which has investors worried and makes many believe that the Euro might be headed lower in the near term. The EUR/USD has also broken below the lower end of the Bollinger band which is a bearish signal. The momentum indicators for EUR/USD have given a fresh sell signal and show a strong momentum shift towards the sell side at the current moment. The relative strength index for the EUR/USD is showing no signs of a recovery which is a bearish sign and has also formed a lower high.
Traders should remain short on the EUR/USD at the current moment, keeping a strict stop loss at $1.33507 with a near term target at $1.3110