Bearish Pullback in Sight Following Local Resistance Rejection

Forex

Economic

Summary:

This target area coincides with the 0.50 and 0.618 Fibonacci retracement levels, establishing a cluster of support in the event of a pullback.

SELL EURUSD

EXP

TRADING

1.15842

Entry Price

1.14720

1.16800

1.15784 +0.00001 +0.00%

0.0

Pips

Flat

1.14720

Exit Price

1.15842

Entry Price

1.16800

In the Eurozone, Germany's July Harmonized Index of Consumer Prices (HICP) held steady at 2.8% year-over-year, matching expectations. Nevertheless, economists warned that energy prices kept rising at an above-average pace, remaining a crucial driver of overall inflation.

On Thursday, the Eurozone calendar will feature Spanish inflation data alongside an update on Industrial Production across the European Union. Production forecasts suggest economists anticipate a slight improvement for June, moving from a -1.2% annual contraction to -0.8%.

Service sector activity readings pointed to mixed outcomes in July. In Spain, the HCOB Services PMI delivered an upside surprise by reaching 58.3 points, comfortably beating both the preliminary estimate and the previous print to reflect solid business expansion. In Germany, the Services PMI saw a modest upward revision to 49.8 points, though it remained below the 50 threshold separating growth from contraction. Meanwhile, the German Composite PMI ticked up to 51.3 points, while the Eurozone composite index moved up to 52.0, pointing to a progressive recovery in private activity led mainly by peripheral economies.

On the inflation front, price pressures demonstrated ongoing persistence. Headline Eurozone inflation picked up to 2.9% year-over-year in July from 2.8% prior, while core inflation made an unexpected bounce to 2.5%. These prints back expectations that the European Central Bank (ECB) will keep a tight policy stance in place over coming months.

On the geopolitical stage, U.S. President Donald Trump reiterated Monday that Iran will not be permitted to obtain a nuclear weapon as a 60-day memorandum of understanding expires without an agreement. Meanwhile, a senior Iranian official told Reuters that Tehran would escalate tensions across the strait and the wider region if diplomacy with Washington breaks down.

Data published by the U.S. Bureau of Labor Statistics showed that the headline Producer Price Index (PPI) remained unchanged in July, following a 0.1% decline in June. On an annual basis, producer inflation slowed to 4.7% from 5.5% previously. Meanwhile, core PPI rose 0.2% month-over-month, decelerating from the 0.4% recorded in the prior period, while its annual rate dropped to 4.2% from 4.7%.

These figures build upon Wednesday's Consumer Price Index (CPI) report, which also lined up closely with market expectations. The combination of cooler inflation prints has prompted investors to dial back expectations for an upcoming rate hike by the Federal Reserve (Fed)—a trend that initially gathered steam after July's disappointing Nonfarm Payrolls (NFP) report.

According to the CME FedWatch Tool, markets are currently pricing in roughly a 32% probability of a rate hike in September, down sharply from 55% a week ago. This shift in expectations has driven a more pronounced drop in short-term U.S. Treasury yields, whereas the decline across longer maturities has been more restrained as elevated energy prices keep inflation risks tilted to the upside. Bearish Pullback in Sight Following Local Resistance Rejection_1

Bearish Pullback in Sight Following Local Resistance Rejection_1

Technical Analysis

EURUSD briefly touched resistance at 1.1615, a level last reached in mid-June where price previously rejected lower toward a local trough of 1.1327 on June 27. Since then, price staged a bullish recovery, but upon retesting this resistance, it reacted to the downside once more. Should price fail to break decisively above this boundary, a downward correction could unfold toward the 1.1472 area, which aligns with local support and the 100 and 200-period moving averages positioned at 1.1500 and 1.1461, respectively. Furthermore, this target area coincides with the 0.50 and 0.618 Fibonacci retracement levels, establishing a cluster of support in the event of a pullback.

Turning to oscillators, the RSI currently sits at 64 after briefly tapping 72 into overbought territory, raising the odds of a corrective push by sellers from this level. Meanwhile, the MACD shows a bullish histogram that is beginning to lose depth, while the signal lines recently bounced higher after testing the neutral mark; a subsequent push below the neutral line would help confirm a potential downward move.

Trading Recommendations

Trading direction: Sell

Entry price: 1.1584

Target price: 1.1472

Stop loss: 1.1680

Validity: Aug 28, 2026 15:00:00

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Bearish Pullback in Sight Following Local Resistance Rejection

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