EUR/USD : Risks are skewed to the downside

Friday’s upbeat payrolls and wage growth figure could reinforce expectations of faster Fed rate hikes.
The escalating US-China trade war could boost could keep the EUR under pressure.
Short-term technical studies have adopted a bearish bias.

Omkar Godbole FXStreet Contributor

For EUR/USD, the path of least resistance is to the downside.

At press time, the currency pair is trading below 1.1546, having closed well below 1.1568 (38.2% Fib R of 1.1302-1.1733) on Friday.

The 5-day and 10-day moving averages (MAs) are trending south, indicating a bearish setup. Meanwhile, 14-day relative strength index (RSI) has adopted a bearish bias.

Further, the yield differential is set to widen in favor of the US dollar as Friday’s payroll data showed the ever-tightening labor market is finally leading to higher wages.

The data average hourly earnings rose by 0.4% in August, pushing the annual rate of increase to 2.9% – the fastest pace since June 2009.

A sustained rise in wage-price inflation could force the Fed to hike rates well above the neutral rate. However, as of now, wages are not rising that fast, nevertheless, Friday’s big number could lift inflation expectations and strengthen the expectations of faster Fed rate hikes.

And last but not the least, the escalating trade war between the US and China and EM concerns could boost the haven demand for the USD.

All-in-all, the pair could remain on the defensive today.

EUR/USD Technical Levels

Resistance: 1.1568 (38.2% Fib R of 1.1301/1.1733), 1.1585 (5-day MA), 1.16 (zero figure)

Support: 1.1530 (Sep. 4 low), 1.1517 (50% Fib R of 1.1301/1.1733), 1.15 (psychological level)

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Strongly Bearish	Oversold	High
1H	Bearish	Oversold	Shrinking
4H	Strongly Bearish	Oversold	Expanding
1D	Strongly Bearish	Neutral	Shrinking
1W	Bearish	Neutral	Low
Updated Sep 10, 04:00 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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