- EUR/USD has gone into a consolidation phase above 0.9800.
- The pair needs to clear 0.9850 resistance to continue to stretch higher.
- The ISM will release September Manufacturing PMI data later in the day.
After having snapped a two-week losing streak, EUR/USD has been struggling to preserve its bullish momentum on Monday. The pair fluctuates in a tight range above 0.9800 in the European morning and the near-term technical outlook suggests that additional gains could be witnessed if 0.9850 resistance fails.
In the absence of high-impact macroeconomic data releases early Monday, the US Dollar Index (DXY) failed to build on Friday's recovery gains and edged lower during the Asian trading hours. Nevertheless, the negative shift witnessed in the risk mood helps the DXY limit its losses and makes it difficult for EUR/USD to gather bullish momentum.
The Euro Stoxx 600 and Germany's DAX 30 indexes were both losing around 1.5% at the time of press. The data published by S&P Global confirmed that the business activity in the manufacturing sector contracted in September.
In the second half of the day, the ISM Manufacturing PMI from the US will be looked upon for fresh impetus. Investors are likely to pay close attention to the Prices Paid sub-index of the survey, which is forecast to decline to 51.8 in September from 52.5 in August. A lower-than-expected print in the inflation component is likely to hurt the dollar in the second half of the day and vice versa.
Meanwhile, US stock index futures are trading mixed. A solid rebound in Wall Street's main indexes on the first trading day of the fourth quarter could allow EUR/USD to extend its recovery. On the other hand, the dollar should be able to gather strength in case safe-haven flows start to dominate the markets during the American trading hours.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart holds comfortably above 50 on Monday. Additionally, the 20-period SMA crossed above the 50-period SMA, confirming the bullish bias in the near term.
On the upside, the Fibonacci 61.8% retracement of the latest downtrend forms initial resistance at 0.9850 ahead of 0.9875 (100-period SMA). With a four-hour close above the latter, the pair could target 0.9925 (200-period SMA) next.
0.9800 (psychological level, Fibonacci 50% retracement) aligns as first support before 0.9750 (Fibonacci 38.2% retracement, 50-period SMA) and 0.9700 (psychological level).
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