EUR/USD Forecast: Bulls struggling as sentiment deteriorates

Valeria Bednarik FXStreet

EUR/USD Current Price: 0.9908

The US ADP survey showed that the number of private jobs increased by 208K in September.
S&P Global downwardly revised EU services output for September, signaling a steeper contraction.
EUR/USD gains bearish traction and approaches critical support at 0.9865.

The EUR/USD pair has lost its bullish momentum and broke through the 0.9900 threshold, as the dollar firms up across the board amid risk sentiment deteriorating quickly. Stock markets took a turn for the worse after the European Union approved the eighth package of sanctions against Russia, including a price cap on Moscow’s crude oil and refined products. The decision was a response to the illegal annexation of the Ukrainian regions of Donetsk, Luhansk, Kherson, and Zaporizhzhia.

Discouraging EU data added to the shared currency weakness as S&P Global downwardly revised the September Services PMIs for the EU. The German index fell to 45, while the EU one dipped into contraction territory, down from 48.9 to 48.8. The final EU Composite PMI resulted at 48.1. On the other hand, the US published the August Goods and Services Trade Balance, which posted a deficit of $67.4 billion, better than anticipated. Additionally, the ADP Employment Change report showed that the private sector added 208K new jobs, beating the 200K expected. Pending release is the ISM Services PMI, foreseen at 56, down from 56.9.

EUR/USD short-term technical outlook

The EUR/USD pair accelerated its slide on a break below 0.9945, the 61.8% retracement of its latest daily decline between 1.0076 and 0.9535. Technical indicators in the daily chart retreated sharply from their midlines, hinting at increased selling interest. At the same time, the pair is back around a flat 20 SMA while far below the longer ones. The next Fibonacci support level is 0.9865, the 50% retracement of the aforementioned rally.

In the near term, and according to the 4-hour chart, the downward potential increased, but another leg lower is not confirmed. The pair remains above its 20 and 100 SMAs, with the shorter one about to cross above the longer one. Technical indicators, in the meantime, retreated sharply from overbought levels, heading lower but still above their midlines. A break below the mentioned static support should be enough to spur additional selling throughout the rest of the day.

Support levels: 0.9865 0.9820 0.9770

Resistance levels: 0.9950 0.9995 1.0035

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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