EUR/USD consolidating at lows after mixed US data, Powell
EUR/USD trades near a fresh two-month low of 1.1671 after mixed US Markit PMIs, which anyway indicated economic expansion. Fed speakers highlighted the need for more fiscal stimulus.
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The EUR/USD pair ends Wednesday trading below the 1.1700 level, maintaining its bearish bias despite being oversold. The 4-hour chart shows that the Momentum indicator has bounced from oversold readings, but also that it holds well into negative levels. The RSI indicator, in the meantime, consolidates near oversold readings, as the pair develops well below all of its moving averages, with the 20 SMA maintaining a sharp bearish slope below the larger ones. Further declines are to be expected on a break below 1.1660, the immediate support level.
Support levels: 1.1620 1.1580 1.1530
Resistance levels: 1.1685 1.1725 1.1760
Data released this Wednesday was mixed but showed that economic growth remains sluggish. The preliminary estimates of the Markit PMIs showed that services output n the Union fell into contraction territory, with the EU index printing at 47.6 from 50.5 in August. Manufacturing activity was mixed across the Union, although the index improved from 51.7 to 53.7. In the US, on the other hand, business activity remained in expansion territory, although services growth was softer than anticipated.
Further fueling dollar’s demand, Wall Street was unable to hold on to pre-opening gains and turned red. Federal Reserve Chair’s Jerome Powell testified again before Congress, and alongside Treasury Secretary Steven Mnuchin said that they are studying ways to provide additional support to small businesses without entering into details. As he did on Tuesday, Powell urged for fiscal support.
This Thursday, Germany will publish the IFO Business Climate, foreseen at 93.8 from 92.6 previously. The US will release Initial Jobless Claims for the week ended September 18, while Powell and Mnuchin will testify before the Senate Banking Committee.
SPECIAL WEEKLY FORECAST
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Another week is coming to an end, and the FX market seems unable to find its way. The EUR/USD pair is poised to finish it little changed around 1.1850, its comfort zone pretty much since September started.