EUR/USD: Time To Switch To Sell EUR/USD?

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EUR/USD: Time To Switch To Sell EUR/USD?

• Payrolls processor ADP said US private employers added 200k jobs in September, the strongest reading since June. It beat a forecast 194k increase. Private payroll gains in August were revised down to 186k from an originally reported 190k. The reading suggests strong US jobs report on Friday – the most important event for financial markets this week. We expect +225k vs. the market forecast of +203k.

• Chicago PMI fell in September to 48.7, its weakest since May, from August's 54.4. The reading was significantly below the market consensus of 53.0.

• New York Fed President William Dudley said the Federal Reserve will strive to have as little effect as possible on the functioning of financial markets when it eventually begins to shrink its USD 4.5-trillion balance sheet. The Fed has said it will stop topping up its balance sheet, and may even sell assets, some time after it raises interest rates.

• Markets were waiting for Fed Chair Janet Yellen’s speech yesterday. However, she did not comment on the US economy or monetary policy in brief welcoming remarks to a community banking symposium.

• Final Eurozone manufacturing PMI eased to a five-month low of 52.0 in September, below August’s 52.3 and unchanged from the earlier flash estimate.
  Export orders rose at a slower rate in September, in part reflecting weaker demand from emerging markets, with the darkening global economic picture dampening business optimism and causing companies to pull-back on their hiring plans. The manufacturing sector is likely to provide only a minor boost to the overall economy in the third quarter, restraining GDP growth to around 0.4%.

• We took a small profit on our EUR/USD long at 1.1190 and now we switch our strategy to ‘sell EUR/USD’. We expect a good US jobs report tomorrow that may be followed by hawkish comments from Fed Vice Chairman Stanley Fischer. What is more, recent Fed policymakers’ opinion suggest that a hike in October cannot be ruled out.

• The market still does not believe in a Fed hike this year. In our opinion these very dovish expectations may change as soon as tomorrow.

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Significant technical analysis' levels:

Resistance: 1.1173 (200-dma), 1.1204 (10-dma), 1.1261 (high Sep 30)

Support: 1.1116 (low Sep 25), 1.1105 (low Sep 23), 1.1090 (low Sep 4)