EUR/USD Analysis: lower low supports a test of 1.1065
|EUR/USD Current Price: 1.1108
- ECB failed to surprise investors, maintaining the status quo.
- Data suggest that the global economic downturn steepened into Q4.
- EUR/USD bearish potential increased in the short-term, but critical support holds.
The EUR/USD pair temporarily lost the 1.1100 threshold, falling to 1.1092, a fresh weekly low, to close the day with losses just above 1.1100. The slump was no surprise, considering the latest European Markit PMI suggested that the economic downturn extended into Q4. Manufacturing activity contracted further in October, according to preliminary estimates, as the German index contracted to 41.9, while for the whole Union, it edged higher to 51.5, beating expectations. Services indexes weakened when compared to the previous month.
Soft growth data weighed on the EUR
The ECB had a monetary policy meeting, and, as expected, it was a non-event. No changes were announced to the current easing path, and President Draghi’s message was quite the usual on risk, growth, and inflation. In his last show, Draghi insisted on the need for an EU fiscal policy, something that he fought for in his eight years. He defended stimulus to his last breath and refused to comment on any future action or Mrs. Lagarde.
US data was mixed, as weekly unemployment claims improved to 212K in the week ended October 18, while Durable Goods Orders fell by 1.1% in September. The US preliminary October Markit PMI were generally encouraging with the Services Index matching market’s expectations with 51.0 and the Manufacturing index beating the forecast with 51.5. The Composite PMI resulted at 51.2, better than the previous 51.0, but below the expected 51.6.
This Friday, Germany will release the November GFK Consumer Confidence Survey, seen at 9.8 from the previous 9.9, and the IFO Business Climate survey for October, foreseen at 94.5 from the previous 94.6. The US will publish the final version of the Michigan Consumer Sentiment Index for October, expected unchanged at 96.
EUR/USD short-term technical outlook
The EUR/USD pair is trading around the 23.6% retracement of its latest daily advance, offering a short-term negative stance, as the pair has moved further below a now bearish 20 SMA in its 4-hour chart. Technical indicators in the mentioned chart hover fell into negative territory but currently lack directional strength. The pair has room to extend its decline toward 1.1065, the 38.2% retracement of the mentioned daily run, with the bearish case firmer if the level gives up. The chance of a bullish extension is now further away, as the pair would need to surpass 1.1180, this week’s high.
Support levels: 1.1095 1.1065 1.1030
Resistance levels: 11145 1.1180 1.1210
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