EUR may be at risk in the near future

Worse-than-expected European data created the catalyst for EUR/USD to break below long-term support.

EUR/USD price action over the past two weeks has highlighted the recent long-term rising channel. The long-bearded weekly candle shows rejection of higher prices, with a possible breakout possible.

This week, prices continued to decline, with the weekly candlestick closing below channel support leaving the pair vulnerable to an extended pullback. The USD appeared to benefit from deteriorating data from Europe and China, highlighting the resilience of the US economy. One thing to keep in mind after the significantly weak US Q2 GDP data is that upcoming US data could signal early signs of an economic slowdown.

EU Producer Price Index (PPI) data released today fell to -7.7% yoy, continuing a worrying downtrend. Lower ex-factory prices will weigh on consumers over time, and if deflationary pressure persists, that could cause profit margins to decline.

Headline inflation is flat, similar to core inflation, but PPI data suggest further easing is likely later this year.