Rejection at Local Resistance Could Trigger Bearish Correction and Offer Selling Setups

Forex

Economic

Summary:

Looking at the oscillators, the RSI recently hit the 75 level; these overbought readings could attract bears looking to capitalize on a downward correction.

SELL EURUSD

EXP

PENDING

1.15850

Entry Price

1.14750

1.16500

1.15424 -0.00090 -0.08%

Pips

PENDING

1.14750

Exit Price

1.15850

Entry Price

1.16500

Eurozone service sector activity indicators showed a mixed performance during July. In Spain, the HCOB Services PMI surprised to the upside by reaching 58.3 points, widely beating both the preliminary estimate and the previous month's reading, reflecting a solid expansion in activity. In Germany, the Services PMI was revised slightly upward to 49.8 points, though it remained below the 50 threshold that separates expansion from contraction. Meanwhile, the German Composite PMI improved to 51.3, while the Eurozone composite indicator advanced to 52.0 points, pointing to a gradual recovery in private activity driven primarily by peripheral economies.

On the inflation front, price pressures displayed some persistence. Headline Eurozone inflation accelerated to 2.9% year-over-year in July from 2.8% prior, while core inflation unexpectedly picked up to 2.5%. These results reinforce expectations that the European Central Bank (ECB) will maintain a tight monetary stance over coming months.

Economic activity also continued to surprise positively. Eurozone Gross Domestic Product (GDP) grew 0.4% quarter-over-quarter during the second quarter, doubling consensus forecasts and recording its fastest pace of expansion since early 2025. On an annual basis, growth accelerated to 1.0%, reflecting a gradual improvement in regional economic conditions.

In Germany, preliminary data showed a rebound in inflationary pressures. The Harmonized Index of Consumer Prices (HICP) advanced to 2.8% year-over-year in July from 2.4% recorded in June, suggesting greater persistence in inflation across Europe's largest economy.

Meanwhile, U.S. labor market data continued pointing to a gradual moderation. The ADP report showed the creation of 44,000 private sector jobs during July, a figure coming in lower than both market expectations and the June data. This release adds to the JOLTS job openings figures, which also came in weaker than expected, increasing attention on the Non-Farm Payrolls (NFP) report.

Even so, U.S. service sector activity remained solid. The ISM Services PMI rose to 54.1 points in July from 54.0 the previous month, though it landed slightly below market expectations.

This set of data has led investors to temper expectations for further rate hikes by the Federal Reserve. According to CME Group's FedWatch tool, the probability of a September rate increase fell to 58%, down from 67% seen earlier in the week, reducing some of the recent backing for the U.S. dollar.

On the geopolitical front, President Donald Trump described talks held with Iran as positive and expressed confidence in an eventual reopening of the Strait of Hormuz. In parallel, various reports indicate that the United States, Iran, and Oman may be close to reaching a provisional agreement aimed at temporarily restoring maritime transit along this strategic route, which would help reduce risks to the global energy supply. Rejection at Local Resistance Could Trigger Bearish Correction and Offer Selling Setups_1

Rejection at Local Resistance Could Trigger Bearish Correction and Offer Selling Setups_1

Technical Analysis

EURUSD has staged a strong bullish drive that began on July 28 when it touched a low of 1.1353. Since then, it has pushed aggressively higher to recently hit a current peak of 1.1557, while rapidly approaching the 1.1585 level where a key local resistance zone resides. Should price react lower from this area, we could see the start of a bearish correction targeting the support level located at 1.1475. Meanwhile, the 100 and 200-period moving averages sit below this region at 1.1412 and 1.1498, respectively, making the support target achievable within a bearish correction.

Looking at the oscillators, the RSI recently hit the 75 level; these overbought readings could attract bears looking to capitalize on a downward correction. On the other hand, the MACD shows a bearish histogram that is starting to lose depth while the signal lines remain above the neutral zone—though correcting closer toward neutral ground—supporting the thesis that one additional move to the upside remains before the correction begins.

Trading Recommendations

Trading direction: Sell

Entry price: 1.1585

Target price: 1.1475

Stop loss: 1.1650

Validity: Aug 18, 2026 15:00:00

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Rejection at Local Resistance Could Trigger Bearish Correction and Offer Selling Setups

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