EUR/USD: Downside Risks Could Reemerge

EUR/USD staged a robust rally yesterday and regained the 1.10 figure amid a weaker greenback across the board. The pair registered highs around 1.1040 but failed to extend the recovery on Thursday and shows early signs of a bearish correction.

German industrial new orders dropped by 2.5% month-on-month in July from 2.7% MoM in the previous month. On the year, new orders were down by 5.6%. another disappointing release from the largest European economy has dented the upside momentum in the pair as recession fears are increasing. At the same time, a buoyant risk sentiment in the global financial markets is capping the local downside pressure on the euro.

In the short term, EUR/USD will hardly be able to regain a sustainable bullish momentum as traders are turning cautious ahead of a key US jobs report due on Friday. Technically, the pair needs to confirm a break above the 1.10 handle. Otherwise, the downside risks could reemerge. On the upside, the 1.1040 serves as the immediate resistance on the way to 1.1060 and 1.11.

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