EUR/USD Forecast: Corrective advance, limited upward potential

EUR/USD Current price: 1.1067

• The United States and Canada celebrate Labor Day, local markets to remain closed.
• The Eurozone Manufacturing PMIs were upwardly revised in August.
• EUR/USD recovers ground, but the upside seems limited in the near term.

The EUR/USD pair recovered some ground on Monday, hovering in the 1.1060 price zone ahead of the American session, which anyway will be uneventful given a holiday in the United States (US). Both the US and Canada celebrate Labor Day, granting limited activity across financial boards until the next Asian opening.

Clues came from equities, with the poor performance of Asian and European indexes weighing on investors’ mood.  The US Dollar is generally weak, while the Euro found modest demand on revised Hamburg Commercial Bank (HCOB) PMIs revisions. According to the final report, manufacturing output in the EU printed at 45.8 in August, slightly better than the 45.6 previously estimated. For Germany, the figure resulted at 42.4, improving from the flash estimate 42.1.

Given the US holiday, the macroeconomic calendar will remain empty in the upcoming hours. Nevertheless, the country will publish multiple employment-related data throughout the week ahead of the Nonfarm Payrolls (NFP) report scheduled for Friday.

EUR/USD short-term technical outlook

Technically speaking, the ongoing advance seems corrective. The EUR/USD pair bottomed at 1.1041, a fresh two-week low before bouncing, and remains below Friday’s high at 1.1094. In the daily chart, buyers appeared around a flat 20 Simple Moving Average (SMA), while the 100 and 200 SMAs remain far below the current level. At the same time, the Momentum indicator heads firmly south, approaching its 100 line from above, while the Relative Strength Index (RSI) has turned flat at around 55. Overall, the risk of a bearish extension seems quite limited.

In the near term, and according to the 4-hour chart, however, the upside seems limited. EUR/USD seesaws around a mildly bullish 100 SMA, while a sharply bearish 20 SMA provides dynamic resistance at around 1.1090. At the same time, technical indicators consolidate within negative levels, suggesting absent buying interest.

Support levels: 1.1020 1.0985 1.0940

Resistance levels: 1.1090 1.1145 1.1190