- EUR/USD has advanced amid weak US data and ongoing political uncertainty.
- US services data, political developments, and new tariffs on EU goods set to dominate trading today.
- Thursday's technical chart is showing improvement after EUR/USD broke above the downtrend channel.
Disappointing data has been weighing on the US dollar – for the second consecutive day – and investors are bracing for another critical release today. Can EUR/USD extend its recovery?
US private-sector job growth has slowed down in September according to ADP – America's largest payroll provider. The increase of 135,000 positions has fallen short of expectations and has also been accompanied by a downward revision for August. Wednesday's ADP Non-Farm Payrolls report joined Tuesday's devastating Purchasing Managers' Index (PMI) for the manufacturing sector. ISM's influential gauge dropped to 47.8 points – the worst in over ten years. Scores below 50 reflect contraction.
And now, all eyes are on the ISM Non-Manufacturing PMI. Contrary to manufacturing, the services sector has been enjoying solid growth, buoyed by robust consumption. The American consumer has been holding the economy on its own forward and investors would like to see this trend continuing. Economists expect a retreat from 56.4 points in August to 55 points in September – still representing satisfactory growth.
See US Service Sector September PMI Preview: How slow is slow?
Trump's troubles, Democrat developments
The US Dollar has also been struggling with political developments. Democrats' impeachment inquiry into President Donald Trump's alleged abuse of powers in the "Ukraine-gate" scandal is advancing. The opposition has summoned various officials involved in the matter to talks behind closed doors. They have also warned that refusal to cooperate with the investigation may be seen as obstruction of justice.
Trump has hit back and attacked his rivals. He called Adam Schiff, Chair of the House Intelligence Committee, a "traitor" that should be dismissed in disgrace. According to FiveThirtyEight, a polling website, Americans are now supporting impeaching Trump for the first time – albeit by a minor gap of 1.6%. Further developments are expected today.
Developments in the Democratic Party have also weighed on sentiment. Senator Elisabeth Warren – which champions financial regulation – is now seen by several pundits as the front-runner to win the nomination. Former Vice President Joe Biden – that led the polls for months – has seen his support eroding amid the inquiry. Trump tried to dig up dirt about Biden and his son Hunter – and some voters are shying away from the former VP – despite the lack of proof of any wrongdoing.
Moreover, Senator Bernie Sanders – which shares similar positions with Warren – has suspended his campaign due to medical issues. If Sanders drops out of the race, his supporters may fall behind Warren – easing her path to clinching the nomination and facing Trump. Investors are likely to frown upon a choice between Warren's anti-bank stance and Trump's trade wars.
The inflow of news has sent investors away from stocks – which tumbled on Wednesday – and into the safety of bonds. The resulting fall in bond yields implies higher chances of the Federal Reserve cutting interest rates later this month and depresses the greenback.
More Stock market crash has three drivers – and they are here to stay
New trade front
The euro's advance against the greenback has been limited due to the announcement of new US tariffs on European goods. The administration is taking advantage of the World Trade Organization's (WTO) ruling against the EU for subsidizing Airbus – the European aviation giant. The US is set to slap duties on aircraft, alcoholic drinks, and other European products on October 18.
The EU has expressed anger at the new levies as a parallel investigation into Boeing – America's planemaker – is set to result in a ruling in favor of the EU next year.
Overall, US data, trade, and politics are set to move EUR/USD today.
EUR/USD Technical Analysis
-637056852584320950.png)
EUR/USD has broken above the downtrend channel – a positive development. On the other hand, its move above the 50 Simple Moving Average has not been confirmed. Upside momentum is minimal. Overall, the picture has improved, but the currency pair is still not out of the woods.
Resistance awaits at 1.0960, which is emerging as a double-top after capping EUR/USD in recent hours and also in late September. It served as support beforehand. Next, we find 1.0995, which provided support in mid-September, and 1.1025, which held it down around the same time.
Support awaits at 1.0926, which was a double-bottom in September before EUR/USD crashed to new lows. 1.0905 was the low point on Wednesday and also works as support. The 2019 low of 1.0879 – recorded earlier this week – is the next line to watch.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.