- The US Nonfarm Payrolls report showed that the country added just 194K jobs in September.
- Sentiment flipped from negative to positive, with rallying equities hurting the dollar.
- EUR/USD consolidates losses near its 2021 low, has room to extend its slump.
The EUR/USD pair fell to a fresh 2021 low of 1.1528 as the world struggles to overcome the pandemic. Resuming economic activity faces a considerable hurdle in bottlenecks and supply chain disruptions, as the recovery is uneven across the globe. Soaring gas prices and the subsequent pressure on inflation are part of this disruptive scenario.
The American dollar benefited from this situation amid its safe-haven condition but also strengthened on relief headlines and speculation of soon-to-come tapering. On the other hand, the shared currency was pressured by dismal local data, indicating slowing growth in the year's final quarter.
At the same time, central banks’ imbalances affected the pair. The US Federal Reserve has long anticipated reducing its pandemic-related facilities programs, while the European Central Bank seems quite comfortable maintaining financial support.
The market’s mood improved mid-week as the US Senate clinched a deal on the debt-limit issue. Not a surprise as clearly, Congress would not let the country fall into default. However, the news gave a nice boost to equities that regardless fell short of backing the battered EUR.
Worrisome German macroeconomic figures
The week was packed with data, reaching a zenith on Friday with the US Nonfarm Payrolls report release. It was a huge disappointment, as the country added just 194K new jobs in September, much worse than the 500K expected. The Unemployment Rate contracted to 4.8%, although it was because the participation rate shrank to 61.6%. The greenback came under selling pressure after the news, but the EUR could not take advantage of the dollar’s broad weakness.
It is fair to say that German figures were the most disappointing, as most of them missed the market's expectations. August Factory Orders fell 7.7% MoM, while Industrial Production in the same month was down 4%. Also, the Trade Balance posted a modest surplus of €13 billion, with exports down 1.2%.
Imbalances between the US and the EU
The EU reported August Retail Sales, which advanced a modest 0.3% in the month, while October Sentix Investor Confidence contracted to 16.9 from 19.6. Finally, the Producer Price Index was up 1.1% in August and 13.4% when compared to a year earlier.
On a positive note, Markit upwardly revised its September Services PMIs, although in the EU business activity has grown at a slower pace.
Across the pond, the US released the official ISM Services PMI, which improved to 61.9 in September, beating expectations. The ADP survey surprised with 568K, much better than the 428K expected, while weekly unemployment claims contracted to 326K in the week ended October 1.
The upcoming week will start with Germany publishing the October ZEW Survey. It will also bring the final readings of German and US inflation data, while the main event will be US September Retail Sales, seen down 0.2% in the month.
EUR/USD technical outlook
The EUR/USD pair remains below the 1.1600 level, and the weekly chart shows that the pair is posting losses for a fifth consecutive week. The pair is currently struggling with the 200 SMA and trading a handful of pips below the 100 SMA. Meanwhile, the 20 SMA maintains a strongly bearish slope well above the current level. At the same time, technical indicators remain within negative levels, consolidating losses near their September lows.
In the daily chart, the bearish case persists. The pair is trading far below bearish moving averages, with the 20 SMA accelerating south below the longer ones. Technical indicators remain within negative levels without clear directional strength, reflecting absent buying interest.
A break below the year low at 1.1528 exposes the 1.1460/70 price zone, a long-term static resistance area and a potential bearish target. A break below it should lead to a test of the 1.1390 price zone. The pair could recover further if it overcomes 1.1640, although selling interest will likely reappear on an approach to the 1.1700 figure.
EUR/USD sentiment poll
According to the FXStreet Forecast Poll, the pair will remain depressed in the near term, as, on average, the pair is seen around 1.1560 in the weekly perspective, with the number of bears and bulls at 43%. Bulls gain some ground in the monthly view, accounting for 48% of the polled experts, but decreasing to 46% in the three-month perspective. Overall, speculative interest seems unwilling to buy the shared currency.
The Overview chart indicates a solid bearish momentum in the three time-frame under study. In the monthly view, most targets accumulate above the current level, but the picture changes in the quarterly perspective, with lower lows in the 1.1200 region coming at sight.
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