EUR/USD Has Lost Its Bearish Strength in The Near Term, but There's a Long Way Up

EUR/USD Current price: 1.1604

  • Market participants are mildly optimistic ahead of critical first-tier events.
  • US ISM Manufacturing PMI contracted by less than anticipated in October, held above 60.
  • EUR/USD has lost its bearish strength in the near term, but there’s a long way up.

The EUR/USD pair neared the 1.1600 threshold as the demand for the dollar eased at the beginning of the week. The pair trades in the 1.1590 price zone heading into the Asian opening, as US indexes hold on to modest gains while US government bond yields post modest intraday advances. Despite German Retail Sales being much worse than anticipated, the shared currency grabbed some attention, falling 2.5% MoM in September. The yearly reading printed at -0.9%, below the previous 0.4% and the 1.8% expected.

US figures were mixed, although the official ISM Manufacturing PMI beat expectations with 60.8 in October. The Markit manufacturing PMI for the same period, however, was downwardly revised from 59.2 to 58.4.

On Tuesday, Markit will publish the final versions of its EU Manufacturing PMIs for October, while the US will unveil the IBD/TIPP Economic Optimism Index for November, previously at 46.8. Little is to be expected, however, ahead of the US Federal Reserve monetary policy announcement on Wednesday.

EUR/USD short-term technical outlook

The EUR/USD pair trades just below a Fibonacci resistance level at 1.1615, the 23.6% retracement of its latest daily decline. At the same time, attempts to rally have been capped by sellers aligned around the 38.2% retracement at 1.1670. The daily chart shows that the pair is currently battling a flat 20 SMA, while the longer moving averages keep heading south far above the current level. Finally, technical indicators ticked higher, with the Momentum within neutral levels and the RSI still below its midline.

In the near term, and according to the 4-hour chart, the pair has turned neutral. The pair is currently struggling around directionless 20 and 100 SMAs, while the 200 SMA heads firmly south above the shorter ones. The Momentum indicator heads lower after failing to cross into positive levels, while the RSI advances, currently at around 50. Bears will likely add on approaches to the mentioned 1.1670 area, while a steeper decline could be expected on a break below 1.1520.

 Support levels: 1.1520 1.1470 1.1430

Resistance levels: 1.1615 1.1670 1.1710

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