German IFO preview: What to expect of EUR/USD?

EUR/USD fails to take on the recovery further beyond 1.0980 region and now turns back lower near 1.0965, amid a renewed bout of buying interest in the US dollar across the board as the monetary divergence between both continents gets more pronounced, ahead of Fed decision scheduled for announcement on Wednesday.

In the meantime, markets look forward to the German Ifo surveys lined up for release at 8GMT in the European session this Monday.

Ifo to slow in wake of Brexit aftermath

The headline Ifo Business Climate Index is expected to tick down to 107.7 in July, from the 108.7 booked last month. The Current Assessment sub-index is seen at 114.0, compared to 114.5 last, while the Ifo Expectations Index - indicating firms' projections for the next six months - is expected to edge lower to 101.2 from the 103.1 registered previously.

The Surveys are expected to show deteriorating business conditions in Germany as the UK’s Brexit vote have had a damaging impact on the German’s confidence. On a bearish report as expected, the EUR/USD pair could drop below 1.0950 levels, while, the major could regain 1.10 handle if the German data surprises on the upside.

EUR/USD Technical Levels

Haresh Menghani, Analyst at FXStreet explains, “Below 1.0950 immediate support, the pair is likely to head back towards retesting recent swing lows support near 1.0900 handle. A follow through selling pressure below 1.0900 support is likely to continue dragging the pair further towards its next major support near 1.0860-50 region, representing 61.8% Fibonacci expansion level of Brexit-led sharp slide and subsequent retracement.”

“Meanwhile on the upside, recovery momentum above 1.1000 handle now might continue to face strong resistance near 1.1040-50 area, which if conquered seems to assist the pair back towards the very important 200-day SMA near 1.1080-1.1100 region.”