EUR/USD Forecast: French Woes and US Labor Hints—Unpacking Today’s Shifts

Highlights

• EUR/USD witnessed a choppy Wednesday, concluding at $1.08629 with a 0.16% rise.
• ECB rate hikes in limbo post PMI readings.
• Amid a bearish sentiment, EUR/USD exhibits tenacity; investors gear up for French data.

Wednesday Overview

On Wednesday, the EUR/USD rose by 0.16% to wrap up the session at $1.08629. It was a choppy session, with the EUR/USD rising to a high of $1.08716 before sliding to a low of $1.08023. However, weak US PMI numbers supported a late rebound.

EUR/USD Movement Hinged on Central Banks and Economic Outlook

French business confidence figures for August will draw interest this morning. The French private sector continued to contract mid-way through the third quarter. According to the HCOB Flash France PMI Survey, French business confidence waned, with manufacturers being the most pessimistic. The Flash PMI Survey suggests a more marked decline in confidence.

Economists forecast French business confidence to weaken from 100 to 99.

A sharp fall in business confidence would reflect the macroeconomic environment. Weaker numbers are bearish for the EUR/USD. However, we expect the EUR/USD to show reduced sensitivity to the figures. Investors are likely expecting weaker confidence after the last PMI numbers.

No ECB Executive Board members are on the calendar to speak today. However, investors should monitor the news wires for comments to the media. The PMI numbers may have closed the door to further ECB interest rate hikes.

The Jackson Hole Symposium and US Labor Market to Test the Pause Theory

US jobless claims and core durable goods orders will provide the EUR/USD with direction today. After the weaker-than-expected US private sector PMIs, we expect market sensitivity to another disappointing round of US economic indicators.

Significantly, the numbers will draw the interest of the Fed. With the Jackson Hole Symposium underway, the numbers could give the Fed the platform to close the door on more interest rate hikes. However, jobless claims would need to spike to provide more reasons for the Fed to stand pat.

EUR/USD Price Action

Daily Chart

The Daily Chart showed the EUR/USD above the lower level of the 1.0900 – $1.0850 support band. Despite the Wednesday gain, the EUR/USD remained below the 50-day EMA while holding above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

Looking at the 14-Daily RSI, the 39.62 reading reflects bearish sentiment. The RSI aligns with the 50-day EMA, signaling a fall through the lower level of the $1.0900 – 1.0850 support band to target the 200-day EMA and $1.08. However, a EUR/USD move through the 50-day EMA would bring the $1.1015 – $1.1060 resistance band into view.

4-Hourly Chart

Eying the 4-Hourly Chart, the EUR/USD hovers above the lower level of the $1.0900 – $1.0850 support band. However, the EUR/USD sits below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.

The 14-4H RSI at 48.61 reflects a bearish sentiment, with selling pressure outweighing buying pressure. Significantly, the RSI signals a fall through the $1.0900 – $1.0850 support band to bring $1.08 into play. However, a move through the 50-day EMA would give the bulls a run at the 200-day EMA.