EUR/USD analysis: about to challenge critical long-term support
|EUR/USD Current price: 1.0880
The EUR/USD pair closed the week at its lowest since last March, plunging on Thursday after the ECB left its economic policy unchanged. Nevertheless, Mario Draghi, reaffirmed that the Central Bank will preserve substantial accommodation, until inflation returns sustainably to the 2% target, delaying for December any new decision. Markets rushed to price in an extension of QE, but at this point, additional stimulus seems out of the table. Friday was quite light from the macroeconomic point of view, with EU consumer confidence increasing from -8.2 to -8 in October, nothing that can help the common currency to recover ground.
For the upcoming days, attention will center in the US preliminary Q3 GDP reading, and expectations are of a sustainable growth in the US. In the EU, the focus will be in the PMI figures for October, with manufacturing expected to expand and services seen stable after previous months' slide.
Technically, the EUR/USD pair has reached a critical support area, given that since early 2015, the pair has been trading pretty much within 1.0840 and 1.1460, with attempts to leave such range being quickly reverted. The imbalance between both Central Banks' policies, could be the trigger that takes the pair out of such range, but investors will have to wait for December to get a confirmation. In the meantime, the pair can break lower, and extend its decline down to 1.0505, the low set at the beginning of December 2015. Technical readings in the daily chart present a strong bearish momentum, despite being in oversold territory, while the 20 DMA has accelerated its decline after breaking below the 100 and 200 DMAs, signaling further slides are likely, on a break below 1.0840. Shorter term, the 4 hours chart shows that technical indicators have bounced modestly from oversold readings, but lack enough upward momentum to confirm an upward correction, whilst the 20 SMA heads lower around 1.0950, providing a strong dynamic resistance.
Support levels: 1.0840 1.0800 1.0760
Resistance levels: 1.0910 1.0950 1.1010
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