EUR/USD Forecast: Support zone at 0.9950/55 keeps the euro afloat
EUR/USD Current Price: 1.1004
- A quiet session for financial markets on Thursday, unaffected by US data.
- Market participants are looking at next week’s FOMC meeting.
- EUR/USD continues to move sideways around parity.
The EUR/USD continued to move sideways on Thursday, momentarily above parity, holding above 0.9950. A quiet session across financial markets contributes to the pair staying in its recent range. Wall Street was mixed and US and European yields moved higher. The US 2-year yield hit 3.86%, the highest since 2007. Traders appear to be in a wait-and-see mode ahead of next week’s FOMC meeting.
The Federal Reserve is expected to raise the Fed Funds rate by 75 basis points. Calls for a 100 bps increase did not change following the latest round of US economic data. Retail Sales rose 0.3% in August against expectations of a flat reading, but the details of the report contained negative details and a notable downward revision to July’s numbers. Initial Jobless Claims come in better-than-expected at 213K, the lowest reading since late May. The Philly Fed dropped in September into negative territory to -9.9. The Empire Manufacturing rebounded more than forecast to -1.5 in September. Industrial Production declined 0.2% in August.
In Europe, the German Wholesale Price Index rose 0.1% in August and the annual rate slowed down to 18.9%. On Friday, the final reading of the Eurozone Consumer Price Index is due. A revision from the preliminary 0.5% monthly increase to 0.6% is expected and the annual rate is foreseen to remain at 9.1%. The only report due in the US on Friday is the University of Michigan’s Consumer Sentiment preliminary reading for September.
As long as market participants continue to predict a more aggressive Fed compared to the ECB, recoveries in EUR/USD will remain limited. The slowdown in economic activity in the Eurozone and the energy crisis are factors that continue to weigh on the euro.
EUR/USD short-term technical outlook
The EUR/USD continues to trade around 1.0000, after finding support again at the 0.9950/55 area. A slide below 0.9950 would expose the 0.9900 area and a break lower should suggest a test of the multi-year low at 0.9862 (Sept 6).
Technical indicators show no clear signs ahead of the Asian session, affected by the low volatility. The consolidation theme could continue over the next hours within the 0.9950/1.0030 range and on a wider range between 0.9910 and 1.0050 until the Fed does its job.
The main EUR/USD trend is bearish, although while above 0.9910, the negative pressure seems limited. On the upside, the euro needs to make a clear break above 1.0190 in order to gain support for a more sustainable recovery.
Support levels: 0.9950 0.9910 0.9870
Resistance levels: 1.0030 1.0055 1.0110
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Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
