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Bearish Correction in Sight Following Deep Overbought RSI Readings
Forex
Economic
Summary:
The MACD shows a bullish histogram that is rapidly losing depth; although the signal lines remain inside positive territory, a bearish crossover would confirm the downside move.
Sell
TradingEURUSD
EXP
1.16676
Entry Price
1.14720
TP
1.17900
SL
1.16681 -0.00051 -0.04%
0
Point
Flat
1.14720
TP
CLOSING
1.16676
Entry Price
1.17900
SL
Geopolitical tensions continue to take center stage across international markets. U.S. Treasury Secretary Scott Bessent is preparing to announce new sanctions against Iran, while Tehran warned that should what it terms an "economic war" waged by Washington persist, it could restrict oil exports through the Strait of Hormuz and other strategic Persian Gulf routes. This environment keeps inflation risks linked to elevated energy costs firmly intact.
Pressure on Iran intensified further after U.S. President Donald Trump announced that tariffs on automobiles, trucks, auto parts, and steel from Canada will rise to 50% starting January 1, 2027. Trump argued that Canada has benefited for years from its commercial relationship with the United States and urged affected companies to relocate production to U.S. soil to avoid the new tariffs.
These developments follow minutes from the Fed's latest meeting, which showed that multiple monetary policymakers remain concerned about persistent inflationary pressures. The document suggested that alongside officials like Beth Hammack, Neel Kashkari, and Lorie Logan, other committee members would also be open to supporting additional rate hikes if inflation fails to show further cooling.
In the Eurozone, the latest inflation figures showed stability, albeit with signs of persistence in select components. Germany's Harmonised Index of Consumer Prices (HICP) held steady at 2.8% year-over-year in July, matching market expectations. Nevertheless, analysts continue to point to energy prices as a primary driver of inflationary pressure, given that they continue to record above-average increases.
Investor attention now shifts toward Spain's inflation print and European Union industrial production data. Forecasts point to a modest improvement in manufacturing activity, with the annual contraction in industrial production expected to narrow from -1.2% to -0.8% for June.
On the other hand, services sector activity indicators delivered mixed results in July. In Spain, the HCOB Services PMI delivered a positive surprise by reaching 58.3, well above both the preliminary estimate and the prior reading, signaling solid expansion in business activity. In Germany, the Services PMI was revised slightly higher to 49.8, though it remained below the 50 mark that separates expansion from contraction. Meanwhile, Germany's Composite PMI rose to 51.3 and the Eurozone Composite index climbed to 52.0, pointing to a gradual recovery in private sector activity driven largely by the region's peripheral economies.
Technical Analysis
EURUSD recently reached resistance near 1.1688—a level last visited on May 29, when price briefly touched the area before rejecting lower, serving as resistance once again in recent price action. For now, price has reacted to the downside in this zone without achieving a decisive breakout, suggesting a downside correction could unfold toward local support at 1.1472. Positioned nearby is the 100-period moving average at 1.1474, while the 200-period average sits at 1.1573; consequently, this support zone aligned with moving average confluence presents a logical downside target.
Turning to the oscillators, the RSI climbed to 71, moving clearly into overbought territory, where a downside rejection could materialize as these elevated levels invite a correction and allow sellers to establish positions. Meanwhile, the MACD shows a bullish histogram that is rapidly losing depth; although the signal lines remain inside positive territory, a bearish crossover would confirm the downside move.
Trading Recommendations
Trading direction: Sell
Entry price: 1.1665
Target price: 1.1472
Stop loss: 1.1790
Validity: Sep 04, 2026 15:00:00
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