EUR/USD Forecast: likely to remain under pressure, US jobs report in focus

Haresh Menghani FXStreet

The political situation in Spain, where the announcement regarding Catalonia's independence is expected to come through on Monday, kept the shared currency on the back foot. This, coupled with persistent US Dollar buying interest, supported by upbeat incoming US economic data and optimism over the US tax reform plans, dragged the EUR/USD pair below the 1.1700 handle to its lowest level since mid-August.

Thursday's US economic data showed initial jobless claims fell more than expected, while the US trade deficit narrowed in August and factory orders also increased more than expected. The greenback got an additional boost after Congressional Republicans passed the budget details and moved one step closer to a tax reform.

Investors now look forward to the keenly watched September US monthly jobs report (NFP), which will be looked upon for reaffirmation of market expectations for another Fed rate hike move in 2017. The job market is expected to have been adversely affected by the recent Hurricanes - Harvey and Irma - with consensus estimates pointing to an addition of 90K new jobs as compared to 156K in August. Hence, any positive surprise should be enough to support the already strong bullish sentiment surrounding the buck.

From a technical perspective, the pair is currently placed closer to a support marked by 23.6% Fibonacci retracement level of 1.0341-1.2092 YTD up-move. A convincing break below the mentioned support, near 1.1675 area, would confirm a fresh bearish breakdown and should accelerate the fall towards the 1.1600 mark. The downward trajectory could further get extended towards an intermediate horizontal support near mid-1.1500s en-route to the key 1.15 psychological mark.

On the flip side, any recovery attempts might now confront fresh supply near the 1.1725 zone, which is followed by resistance near the 1.1760 horizontal level. Any subsequent up-move beyond the 1.1800 handle is more likely to remain capped at 50-day SMA support break-point, now turned strong resistance, near the 1.1845-50 region.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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