EUR/USD Forecast: Corrective advance aims to test the 1.0600/30 area

EUR/USD Current Price: 1.0528

• S&P Global released the final September PMIs for the EU with modest upward revisions.
• The US ADP survey on private job creation posted a modest 89K increase in September.
• The EUR/USD pair corrects extreme oversold conditions could extend its gains by some 100 pips.

The EUR/USD pair regained the 1.0500 figure early Wednesday, retaining gains ahead of Wall Street’s opening. The US Dollar shed some ground throughout the first half of the day amid overbought conditions and as investors awaited relevant United States (US) data.

S&P Global unveiled the final estimates of the September Services and Composite PMIs, which brought some positive surprises. The German services index was upwardly revised to 50.3, slightly better than the 49.8 previously calculated. However, the official report noted that there was “only a fractional increase in activity and one that was driven in most part by the clearing of backlogs of work.”  The final Euro Zone Services PMI was confirmed at 48.7, while the Composite PMI printed at 47.2. Also, the EU published August Retail Sales, which fell by 1.2% MoM and 2.1% YoY, worse than anticipated. Finally, the Producer Price Index (PPI) was up by 0.6% in August, meeting the market’s forecast.

Across the pond, the US published the September ADP survey on Employment Change, which showed that the private sector added a measly 89K new positions in the month. S&P Global will publish the final US September Services and Composite PMIs, while the country will publish the official ISM Services index for the same month. Finally, the macroeconomic calendar includes August Factory Orders and a speech from European Central Bank (ECB) President Christine Lagarde.

EUR/USD short-term technical outlook

The EUR/USD trades around 1.0520 and trimmed most of its weekly losses. The advance, however, seems corrective, according to technical readings in the daily chart. Indicators head firmly higher within negative levels, leaving oversold territory. Nevertheless, the pair develops far below a bearish 20 Simple Moving Average (SMA), which provides dynamic resistance at around 1.0630. The longer moving averages, in the meantime, slowly turn lower far above the shorter one.

In the 4-hour chart, EUR/USD crosses above a mildly bearish 20 SMA while still below the longer ones, anyway, supporting a continued upward correction. The Momentum indicator recovered sharply from extreme oversold readings but remains below its 100 line. The Relative Strength Index (RSI) indicator, however, has reentered positive ground, now advancing at around 52.

Support levels: 1.0485 1.0450 1.0410  

Resistance levels: 1.0540 1.0590 1.0630

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