EUR/USD Forecast: bouncing modestly but at risk to retest the yearly low

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1404

EU Markit PMI indicated the lowest rate of growth in two years.
US data and Fed speakers to keep traders busy today.

The EUR/USD pair fell below the 1.1400 level, as despite market's mood improved, European jitters remain at the eye of the storm, after the EU rejected Italian's coalition government draft budget, claiming that the deficit target and overly optimistic growth estimates posed a serious threat to economic stability in Europe. The country has three weeks to submit a revised version. Is the first time the European Commission asks a member state to review its budget.

Adding pressure on the common currency, the preliminary October Markit PMI missed expectations, with only positive numbers in France. The Manufacturing and the Services sectors all saw decreased activity resulting in the EU Composite PMI coming in at 52.7, the slowest rate of growth in two years, led by an export slowdown and weakness in the services sector.

Ahead of the opening, US indexes are up, with the DJIA roughly 150 points and would be interesting how the dollar reacts against its rivals, as even with stocks up, the high-yielding Aussie is under pressure. The US calendar will offer today October preliminary Markit PMI, September New Home Sales, seen declining for 1.4% MoM, while several Fed's members will give separate speeches throughout the session.

The EUR/USD pair accelerated once it broke 1.1430, its former October low, and has now little in the way toward 1.1300, the yearly low posted mid-August. The pair recovered some pips after bottoming at 1.1378 but maintains a strong bearish stance according to technical readings in the 4 hours chart, as the decline accelerated after multiple failed attempts to overcome its 20 SMA. The Momentum indicator maintains its sharp downward slope while the RSI also heads south within oversold levels, maintaining the risk lean to the downside despite the ongoing bounce.

Support levels: 1.1375 1.1330 1.1300

Resistance levels: 1.1430 1.1470 1.1510

View Live chart for the EUR/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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