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EUR/USD Daily Forecast – Sellers Cap Recovery at Channel Resistance

By:
Jignesh Davda

After a sharp recovery higher yesterday, EUR/USD is once again under pressure as sellers have defended a technical resistance area.

EUR/USD

Weak US Manufacturing Data Causes Volatile Reaction

The ISM manufacturing index fell to a 10-year low in the US which caused the sharp push higher in EUR/USD on Tuesday. However, the pair has pared most of the gains that followed the rally as the dollar is seen recovery in early trading on Wednesday. The same data release put equities and bond yields under pressure which has underpinned the dollar.

This is more noticeable in some other major currency pairs such as USD/CHF. This pair is on the verge of breaking to a fresh three-month high which seems to suggest the dollar decline yesterday was merely a correction rather than the start of a new trend. Although to be fair, the Swiss franc is under some pressure today as inflation figures fell short of expectations.

Data in Europe was better than expected as there was a notable decline in the number of unemployed people in Spain during September. Later today, the ADP will report jobs data for the US. The ADP report usually provides a good idea of how the official Non-Farm payrolls report, which is scheduled for release on Friday, will shape up.

Technical Analysis

Considering the downward momentum in EUR/USD in early trading today, it appears the pair may have resumed within its downtrend.

At the same time, I suspect yesterday’s rally has set a bit of a floor for the near-term. For that reason the pair might struggle to break to fresh lows in the near-term. This can change later in the week following the NFP jobs report as it typically results in a volatile reaction in the dollar pairs.

EURUSD 4-Hour Chart

For the session ahead, the 1.0900 handle stands to offer support for the pair. Beyond that, further support is seen at 1.0881 which held the pair higher yesterday.

A horizontal level at 1.0930 offers resistance. The level held the pair higher twice in September before finally breaking down late in the month. As well, there is confluence near the level as the upper bound of a trend channel comes into play.

Bottom Line

  • EUR/USD has brushed off yesterday’s poor US data and wiped out a bulk of Tuesday’s rally.
  • Near-term resistance is found at 1.0930 while the 1.0900 handle stands to offer some support.

About the Author

Jignesh has 8 years of expirience in the markets, he provides his analysis as well as trade suggestions to money managers and often consults banks and veteran traders on his view of the market.

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