EUR/USD Forecast: Turnaround Tuesday? Only to the downside as long list of issues only grows
- EUR/USD has reversed its recovery and has slipped back to around 1.16.
- Issues ranging from Facebook's outage to new inflation fears are set to push the pair lower.
- Tuesday's four-hour chart is showing momentum has flipped back to the downside.
Is the Internet down? That is a question many have grappled with after failing to send Whatsapp messages, catch up on Facebook or scan Instagram. That outage has since been fixed, but the downing of Facebook's stock has been contributing to the risk-off mood supporting the safe-haven dollar. EUR/USD has additional reasons to fall.
China is on holiday through Thursday, but the woes of its property developers continue worrying investors. Fantasia Holding Group missed a debt payment and Sinic was downgraded by Fitch Ratings. These are the latest developments joining the financial dire straits of Evergrande, the Asian giant's second-largest construction firm.
Even if Beijing succeeds in engineering a soft landing for the sector, fears of weaker demand are weighing on sentiment. China's need for to burn more coal – to prevent a different outage than the one Facebook suffered – is related to the global energy crunch. Europe is already struggling with soaring natural gas prices, and oil is now soaring as well.
WTI Crude Oil hit $78 on Monday, the highest level since 2014, after OPEC+ members stuck to their plan to raise output by only 400,000 barrels per day. Higher prices at the pump could also slow the recovery from the pandemic.
Worries about inflation will likely be eyed in the ISM Services Purchasing Managers' Index (PMI). This survey of America's largest sector tends to serve as an indicator toward the Nonfarm Payrolls report, but the Prices Paid component could steal the show if it remains high. Another indication of inflation could keep the pressure on the Federal Reserve to taper its bond-buying scheme.
US September ISM Services PMI Preview: Eyes on inflation and employment details
Adding in uncertainty about the US debt ceiling – two weeks to go until an unimaginable default on debt payments – and the slow pace of German coalition talks, and there is more room to the downside.
EUR/USD Technical Analysis
Euro/dollar has ended its flirt with upside momentum and continues trading below the 50, 100 and 200 Simple Moving Averages. Bears remain in control.
Some support awaits at the daily low of 1.1590, followed by the 2021 trough of 1.1562. Further down, 1.15 awaits.
The temporary high of 1.1610 is the first resistance line to watch. Monday's high of 1.1640 is next up, and it is followed by 1.1665.
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Author
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.
