EUR/USD Price Forecast: Undergoing recovery unlikely to continue amid US political woes

EUR/USD Current price: 1.1615

• US government shutdown and fresh tensions with China keep markets in cautious mode.
• Multiple Federal Reserve officials will be on the wires during the American afternoon.
• EUR/USD is technically neutral in the near term, decreased buying interest becoming notorious.

The EUR/USD pair found a near-term bottom at 1.1542 on Wednesday, currently trading at around 1.1615. The US Dollar (USD) surged throughout the first half of the week amid political and trade noise, backing demand for safe-haven assets. Concerns revolved around the United States (US), as the federal government remains shut down, while President Donald Trump unexpectedly decided to re-escalate the trade war with China on Friday.

The US government ran out of funding on October 1, and since then, Democrats and Republicans have been unable to agree on a funding bill. A funding patch presented by the GOP was rejected by Democrats on Tuesday night, extending the shutdown for a second consecutive week. Bipartisan talks continue, but there seems to be no commitment in one way or the other.

Tensions also arose amid the escalation of trade tensions between China and the US, following US President Trump's threat to hit Chinese imports with a 100% levy. As days went by, however, financial markets have shrugged off some of such fears, with global stocks trading mixed.

On the data front, the Eurozone released August Industrial Production, which declined by 1.2% MoM, better than the 1.6% slide expected, although worsening from the previous 0.3%. On a yearly basis, Industrial Production rose 1.1%. Other than that, the US MBA Mortgage Applications report showed a setback of 1.8% in the last week.

The US calendar will remain empty, albeit multiple Federal Reserve (Fed) officials will be on the wires throughout the American afternoon.

EUR/USD short-term technical outlook

The EUR/USD pair has made little progress in the last few days, confined to a well-limited range since the week started. The daily chart shows the pair is stuck around its daily opening, while a directionless 100 Simple Moving Averages (SMA) contained advances in the 1.1640 region. At the same time, a bearish 20 SMA gains downward traction above the longer one, hinting at decreased buying interest. Finally, technical indicators remain within negative levels with uneven directional strength, also reflecting the absence of fresh buyers.

The near-term picture is neutral. In the 4-hour chart, the EUR/USD pair trades above a mildly bullish 20 SMA, while the 100 SMA extends its slide below a flat 200 SMA above the current level. At the same time, the Momentum indicator aims marginally higher right above its 100 line, while the Relative Strength Index (RSI) indicator heads nowhere at around 52, failing to provide clear directional clues.

Support levels: 1.1585 1.1540 1.1500

Resistance levels: 1.1640 1.1680 1.1710