|

EUR/USD Forecast: Trade hopes dim outlook after poor data-related recovery

- EUR/USD has been attempting to recover amid upbeat euro-zone data

- Headlines coming out from the US-Sino trade talks are set to move markets.

- Wednesday's four-hour chart is pointing to fresh falls for the currency pair.

Has the German economy bottomed out? That may help the euro to battle the recent wave of USD strength stemming from upbeat data and optimism about trade talks.

German Factory Orders beat expectations with an increase of 1.3% in September, substantially beyond 0.1% expected. The manufacturing sector has been dragging the continent's locomotive down, while other parts of the economy have been keeping it afloat. 

Markit's final Services Purchasing Managers' Index (PMI) for Germany adds to the argument that the industry is not dragging the continent's largest economy to a recession. It has been revised up to 51.6 against 51.2 in the original publication. 

These figures, alongside an upward revision to August's euro-zone Retail Sales figure to 0.6%, have allowed the common currency to recover against the dollar. While EUR/USD has been nearing 1.11, it is still below levels seen earlier in the week.

Dollar drives forward on data and tariff hopes

The greenback advanced on Tuesday after the ISM Non-Manufacturing PMI beat expectations with 54.7 points. Similar to Europe, America's economy is split between robust consumption – better than Europe's – and a struggling manufacturing sector.

The dollar also enjoys upbeat reports from US-Sino trade talks. Beijing has reportedly asked Washington to remove not only the latest 15% tariffs imposed in September, but also the 25% ones dating to 2018. While China's demands may break up the talks, markets are set to cheer an American agreement to remove more duties.

The erratic nature of President Donald Trump's trade war has been weighing on markets and was one of the reasons for the Federal Reserve's three rate cuts in a row. A deal between the world's largest economies – even one that skips sensitive, structural issues – reduces the chances of further rate cuts by the Fed.

Neel Kashkari, President of the Minnesota branch of the Federal Reserve, has said that interest rates are now accommodative – indicating he supports the bank's long pause. Kashkari is known as a dove – backing loose monetary policy. His words contribute to a stronger dollar.

John Williams of the New York Fed and Charles Evans from the Chicago branch will speak today.

All in all, while upbeat figures from the euro area may keep the single currency bid, the general trend is of dollar strength – pending news from the negotiations. 

EUR/USD Technical Analysis

EUR USD Technical Analysis November 6 2019

EUR/USD is suffering from downside momentum on the four-hour chart and has lost the support of the 50 and 100 Simple Moving Averages. The Relative Strength Index has bounced above 30, thus exiting oversold conditions and allowing for a resumption of the downfall.

Overall, bears are in control.

Support awaits at 1.1070, which was a double bottom in late October. It is followed by a fresh November low of 1.1062. The next line to watch is 1.10, which was a quadruple top in early October. It is followed by 1.0940

Euro/dollar faces resistance at 1.1115, which was a swing low earlier in the week served as resistance beforehand. Next, we find 1.1130, which was a support line on Friday. It is followed by the stubborn double-top of 1.1180, and then by 1.1230. 

Background: Euro/dollar ugly contest

The world's most popular currency has been seeing a battle between central banks – both enacting accommodative monetary policy and pushing their respective currencies lower. The Federal Reserve has slashed rates in the past three meetings after raising them as late as December 2018. 

At the same time last year, the European Central Bank concluded its bond-buying program and expressed optimism about raising rates. Yet similar to the Fed – the ECB also made a U-turn and cut rates in September. Moreover, the Frankfurt-based institution has restarted its bond-buying scheme this month. 

The ECB seems to be winning this struggle – EUR/USD is generally lower. When the global economy slows down, the safe-haven US Dollar tends to outperform the euro. However, the common currency has been far from collapsing, holding its ground.

More EUR/USD Forecast: Market needs to finishing digesting Fed’s hit

Author

Yohay Elam

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

More from Yohay Elam
Share:

Editor's Picks

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.
 

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

RBNZ set to pause interest-rate easing cycle as new Governor Breman faces firm inflation

The Reserve Bank of New Zealand remains on track to maintain the Official Cash Rate at 2.25% after concluding its first monetary policy meeting of this year on Wednesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months. 

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.