EUR/USD Daily Forecast – Euro Bounces After Hitting a Three-Week Low

EUR/USD broke lower yesterday after posting a double top. The pair now threatens a breakdown from a broader double top pattern.
Jignesh Davda

Euro Catches a Bid on Positive PMI Data

Services PMI data out of Europe has mostly come in ahead of expectations, underpinning EUR/USD. All of the economies that reported today held in expansion and three out of five of the reports exceeded analyst expectations.

Yesterday, the US non-manufacturing PMI came in stronger than expected, triggering broad-based strength in the greenback. This follows Friday’s jobs report which was also stronger than expected.

EUR/USD is showing an interesting pattern. The pair was on the verge of breaking lower from a double top pattern at the European open yesterday after failing to break above 1.1175 twice over the past week.

The exchange rate broke lower and surpassed the measured move objective of 1.1080. It is now showing a similar pattern that has formed since October 21. The measured move objective for the broader pattern falls at 1.0966.

But the pair is firmly bid in early European data on the back of the mentioned PMI data. The reaction once US traders arrive at their desk later in the day will be important. Data-wise, the economic calendar is light. The markets will tend to focus on ongoing developments in the trade war. Also, shifts in risk sentiment stand to impact the dollar as the rally in equities around the world started to lose some momentum after the S&P 500 futures closed slightly lower on Tuesday.

Technical Analysis

EUR/USD is headed higher and support at 1.1072 is being respected. This is a fairly important level as it held the pair higher in late July and August and then lower in September.

EURUSD Daily Chart

What I’m looking at, and what I think is more important, is yesterday’s break below 1.1129. The fact that the pair broke below the level shows weakness. Especially since the 100-day moving average falls near it.

Because of this, I would not rule out further downside in the pair. At the same time, I don’t think it makes sense to get aggressively bearish the pair because of the strong performance in October. After all, this led to a bullish engulfing candle on a monthly chart that wiped out two prior months of gains.

Bottom Line

  • EUR/USD is catching a bid after testing major support.
  • The pair is underpinned by better than expected PMI data out of Europe.
  • Yesterday’s drop below the 100-day moving average signals weakness. I expect rallies will be sold in the pair, especially if the pair were to restest of the moving average.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.