EUR/USD Forecast: Unconvinced bulls at the brink of giving up

EUR/USD Current Price: 1.0795

• European data missed expectations, limiting Euro’s recovery despite a better market mood.
• The United States and Canada celebrate Labor Day, local markets will remain closed.
• EUR/USD bounced modestly from its monthly low, sellers retain control.

The EUR/USD pair recovered some ground on Monday, currently trading at around the 1.0800 level after bottoming at 1.0771 early in the Asian session. The US Dollar is giving up some of its Friday’s gains, resulting from United States (US) data. On the one hand, the country released the August Nonfarm Payrolls (NFP) report, which showed the labour market is cooling while wage pressures eased. On the other, the ISM Manufacturing PMI improved to 47.6 in August from 46.4 in the previous month, still indicating economic contraction.

Wall Street fell with the news but finished Friday in the green, although US Treasury yields ticked north. Investors believe a loosening job market will prevent the Federal Reserve (Fed) from tightening the monetary policy, although better-than-anticipated growth-related figures allow the central bank to adjust it. At this point, financial markets expect the Fed to remain on hold in the September meeting but doubt what the central bank may do in November.

Speculative interest started the new week with modest optimism, as reflected by the positive tone of Asian and European indexes. Wall Street’s futures are marginally higher at the time being, although activity will most likely be limited through the American session as the US celebrates Labor Day, with local markets closed until Tuesday.

Data-wise, Germany released the July Trade Balance, which posted a surplus of €15.9 billion, missing expectations and below the previous €18.7 billion. Additionally, the Euro Zone Sentix  Investor Confidence fell to -21.5 in September from -18.9 in August. Tepid data prevent the Euro from advancing against its American rival. It is worth adding that European Central Bank (ECB) President Christine Lagarde is due to speak at an event in London later in the day, and her words may impact the Euro.

EUR/USD short-term technical outlook

The EUR/USD pair trades near the August low at 1.0765, and the risk remains skewed to the downside. In the daily chart, the pair develops below all its moving averages, with the 200 Simple Moving Average (SMA) providing dynamic resistance at around 1.0815. At the same time, the 20 SMA maintains its firmly bearish slope above the mentioned 200 SMA and below a flat 100 SMA. Technical indicators, in the meantime, have turned modestly higher but remain within negative levels, falling short of indicating additional gains.

For the near term, and according to the 4-hour chart, the upside also seems well-limited. EUR/USD trades below bearish moving averages, reflecting sellers’ dominance. Finally, technical indicators have bounced from oversold levels but remain nearby without directional strength. The bearish case will strengthen once below the aforementioned 1.0765, as significant stops are suspected below the level.

Support levels: 1.0765 1.0720 1.0760

Resistance levels: 1.0815 1.0850 1.0890  

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