EUR/USD ANALYSIS TALKING POINTS
- U.S. labor data unlikely to deter Fed officials.
- EUR/USD weekly long upper wick a concern for euro bulls.
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EURO FUNDAMENTAL BACKDROP
The euro remains relatively cautious today ahead of the U.S. Non-Farm Payroll (NFP) print later this afternoon with estimates pointing to a slight decline from August. This being said, unemployment is set to stay constant which may keep the greenback supported should actual data fall in line with expectations.
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EUR/USD ECONOMIC CALENDAR
Source: DailyFX economic calendar
Yesterday’s ECB minutes did not reveal anything notable with money markets now reflecting a 85bps interest rate hike October 27th (see table below). Fears of a global slowdown and recession concerns in the eurozone are dominating factors that favor the U.S. dollar over the euro in 2022. With no signs of a ‘Fed pivot’ from Fed officials themselves, it is difficult to see a shift in narrative before year end.
ECB INTEREST RATE PROBABILITIES
Source: Refinitiv
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily EUR/USD price action this week showed yet another rejection by bears at the medium-term trendline (black) which coincides with the psychological parity level. Since then, the euro has slipped back below the 0.9854 December 2002 swing low while the Relative Strength Index (RSI) echoes short-term fundamental uncertainty (NFP) at this point.
Resistance levels:
- 1.0000
- 50-day EMA (blue)
- 0.9854/20-day EMA (purple)
Support levels:
- 0.9685
- 0.9601 (September 2002 swing low)
- 0.9500
EUR/USD WEEKLY CHART
Chart prepared by Warren Venketas, Refinitiv
For me the key lies in the weekly candle close which currently illustrates a long upper wick (white) candle. Should the candle close in this fashion, technical analysis suggests a continuation of the downtrend going forward.
IG CLIENT SENTIMENT DATA: MIXED
IGCS shows retail traders are currently LONG on EUR/USD, with 57% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning, we favor a short-term cautious bias.
Contact and followWarrenon Twitter:@WVenketas
