EUR/USD Bears to Retarget Sub-$1.095 on ADP Nonfarms

Highlights

• On Wednesday, the EUR/USD sits in the hands of Spanish employment numbers early in the session.
• After woeful manufacturing PMI numbers from Spain, we could see increased sensitivity to the report ahead of the US session.
• The nearer-term technical indicators are bearish, with the bears eying $1.0950.

On Tuesday, the EUR/USD declined by 0.37% to wrap up the day at $1.09843. Manufacturing PMI numbers from euro area member states and the Eurozone sent the EUR/USD into negative territory.

After bearish manufacturing sector PMIs from Tuesday, the Spanish economy will be in the spotlight again. Economists forecast a 20.0k fall in unemployment after a 50.3k side in June.

Stable labor market conditions across the euro area have supported consumption and the services sector amidst the manufacturing sector slump. However, weak numbers would align with the more pessimistic economic outlook.

No ECB members are on the calendar to speak, leaving chatter with the media to move the dial.

The US Session

It is a busy US session, with ADP nonfarm employment numbers for July in focus. While the latest US CPI Report eased bets on a September Fed rate hike, tighter labor market conditions would support a further pickup in wage growth and drive demand-fueled inflation. Economists forecast a 188k increase. In June, the ADP reported a 497 surge.

Labor market conditions remain a consideration for the Fed and monetary policy. Tighter labor market conditions would lead to higher wage growth levels and demand-driven inflation pickup. The US labor market forms part of the Fed’s dual mandate, with the longer-run normal rate of unemployment estimated to be 4.1%. The US unemployment rate fell from 3.7% to 3.6% in June.

EUR/USD Price Action

Daily Chart

The Daily Chart showed the EUR/USD hover below the lower level of the $1.1060 – $1.1015 support band. However, despite the bearish Tuesday session, the EUR/USD held above the 50-day ($1.09753) and 200-day ($1.07866)  EMAs, sending bullish near and longer-term price signals.

A EUR/USD hold above the 50-day EMA would support a move through the $1.1015 – $1.1060 support band to target $1.11. However, a fall through the 50-day EMA ($1.09753) would bring sub-$1.0950 into view.

Looking at the 14-Daily RSI, the 45.98 reading sends bearish price signals. The RSI suggests a fall through the 50-day EMA to target sub-$1.0950.

4-Hourly Chart

Looking at the 4-Hourly Chart, the EUR/USD sits below the lower level of the $1.1060 – $1.1015 support band. After the bearish Tuesday session, the EUR/USD remained below the 200-day ($1.10093) and 50-day ($1.10393) EMAs, sending bearish near and longer-term price signals.

The 50-day EMA narrowed on the 200-day EMA, signaling a fall to sub-$1.0950. However, a EUR/USD move through the 200-day EMA and the lower level of the $1.1015 – $1.1060 support band would give the bulls a run at the 50-day EMA ($1.10393).

The 14-4H RSI at 43.12 sends bearish EUR/USD price signals, with selling pressure outweighing buying pressure. Significantly, the RSI aligns with the 50-day EMA, signaling a fall to sub-$1.0950.