Market Overview

EUR/USD Forecast: Yet Another Dead-Cat Bounce? The Downside Is More Appealing

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  • The EUR/USD remains on the back foot in the wake of the new week.
  • Trade tariffs, Emerging Markets, and Brexit are set to move markets. 
  • The technical picture is decidedly bearish for the pair.

The EUR/USD is trading in the mid 1.1500s, unchanged after falling on Friday. The greenback enjoyed two positive developments. The Non-Farm Payrolls report beat expectations with an increase of 201,000 jobs. More importantly, wages advanced up 0.4 percent MoM and 2.9 percent YoY, increasing the odds of a fourth rate hike in December, on top of an expected one in September.

The second development supporting the US Dollar is an adverse one. US President Donald Trump announced the preparation of additional tariffs on $267 billion of Chinese goods, on top of the planned ones on $200 billion worth of products. The deadline for public comments on those levies on $200 billion ended on Thursday night and markets are waiting the implementation, which has yet to come.

Apart from the duties and the US economy, Emerging Markets are also of interest. While we have not seen any outstanding deterioration, the crisis in Turkey and that in Argentina are far from any kind of resolutions. The Turkish Central Bank makes its decision on Thursday.

The European Central Bank also holds its meeting on Thursday and no new policy announcements are due. The ECB is due to reduce its monthly bond buys to €30 billion from October. Nevertheless, President Mario Draghi's press conference is always of interest. 

Positive developments on the Brexit front have sent the Pound higher last week and also helped the Euro. Additional headlines can have their say in the EUR/USD also during this week.

EUR/USD Technical Analysis

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The technical picture is undoubtedly bearish. The pair dropped below the 200 Simple Moving Average on the four-hour chart. The Relatively Strength Index is below 50 but above 30, thus not reflecting oversold conditions. The recent dips below the double-bottom at 1.1530 is also a bearish sign.

Below 1.1530, a trough seen in both September and August, the next support line is at 1.139, a swing low from mid-August. More significant support is at 1.1445 which supported the EUR/USD beforehand. 1.1365 and 1.1300 are next down the line.

1.1605 was a temporary support line last week. The high point of the previous week was 1.1660 and it is another line of resistance. 1.1695 and 1.1735 are next up.

Posted-In: FXStreetNews Eurozone Forex Econ #s Markets

 

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