Fundamental analysis of EUR/USD

The EUR/USD pair continues to decline, trading at 1.07730. This behavior of the pair was influenced by such factors as the expectation of Fed Chairman Powell's speech and disappointing US economic indicators.

On Friday, data on the German economy takes center stage, focusing on the country's GDP and business climate index. After disappointing PMI data for August, market participants are preparing for potentially gloomier news. Germany's economy is forecast to contract by 0.2% year-on-year in the second quarter and remain flat in the next quarter. Notably, a quarterly contraction could have a significant impact on the market, which would also make the European Central Bank cautious. The business climate index is forecast to fall to 86.7 from a previous reading of 87.3, although this data could be overshadowed by GDP figures. While the focus remains on the state of the German economy, investors will be keeping a close eye on ECB statements, particularly the speech by its president Christine Lagarde, which is scheduled for today. Recent poor PMI results in the eurozone have cooled expectations for an ECB rate hike in September. Any hawkish remarks could revive buying interest.
On the other side of the ocean, final Michigan consumer sentiment index data is due in the afternoon. Despite encouraging US retail sales data, consumer sentiment declined in August. Any upward correction in this data could signal a more aggressive monetary policy stance by the Fed. An increase in consumer sentiment could mean an increase in consumption, leading to demand-driven inflation. This, in turn, could lead to further rate hikes, affecting consumer spending and, consequently, inflationary trends. According to preliminary data, Michigan's consumer sentiment index fell from 71.6 to 71.2 in August. Nevertheless, the cornerstone event is expected to be Powell's speech, in which any speculation of a "longer-term rate hike" could tip the scales in favor of the dollar. The positive performance of the US economy and the seemingly more decisive stance of the Federal Reserve has led to a stronger dollar, which has put pressure on the euro. At the same time, the US dollar received a boost from rising US Treasury bond yields and positive economic data. The US Dollar Index rose to its highest level since June, while the S&P 500 Index futures experienced a decline.
Looking ahead, German second-quarter GDP data and business climate index data for August will draw the attention of EUR/USD traders. In addition, sentiment and inflation data in the US will provide additional perspectives. However, the key events will remain the speeches of Lagarde and Powell, which are expected to determine the market direction.
Technical analysis and scenarios:

EUR/USD is currently trading at 1.07730, below several resistance levels. The Bollinger Bands indicate that price volatility is widening, with the pair trading in a lower range, which is generally considered bearish. Downward Bollinger Bands indicate a continuation of bearish pressure. The Stochastic Oscillator is in oversold territory, which could indicate potential short-term buying pressure. However, the MACD indicates bearish momentum as its value is below the signal line. Given the presence of bearish indicators and the fact that the price is trading in the lower range of the Bollinger Bands, the main scenario suggests further declines.
Main scenario (SELL)
Recommended entry level: 1.07260.
Take Profit: 1.06640.
Stop Loss: 1.07700.
Alternative scenario (BUY)
Recommended entry level: 1.08140.
Take Profit: 1.09000.
Stop loss: 1.07700.