- Summary:
- EURUSD has lost 2 percent in the last month, but is the latest shift in the economic environment in the EU and US enough to cause a reversal?
EURUSD rose marginally in the New York trading session on Thursday, as mixed Eurozone macroeconomic data and falling US treasury bonds weighed down on the dollar. The pair traded at 1.0803 at the time of writing, having gained 0.2 percent on the daily chart. The move terminated a three-day losing streak for the pair, and significantly returned it above the psychological 1.0800 round figure support.
The currency pair remains subdued by a bearish undercurrent, as it is down by 0.25 percent in the last five sessions and has lost 2.7 percent in the last month. However, a return to the 1.0800s territory is significant, as it previously served as an accumulation zone in July and August. In addition, a break above that point in early August led to an uptrend that accumulated 2 percent in monthly gains.
Germany and France, the two largest economies in the Eurozone, reported mixed PMI data in October, putting a lid on the euro’s gains. Germany’s Services PMI grew to 51.4, beating the forecast figure of 50.6. Similarly, its Manufacturing PMI beat analysts, forecasts, coming in at 42.6 against 40.6.
On the other hand, France’s Services PMI read 47.3 percent in October, below the forecast 49.0. Its Manufacturing PMI was at 44.5, lower than the forecast figure of 44.9. Overall, the Eurozone Manufacturing PMI beat forecasts, at 45.9 against 45.1.
However, the strong show by the Eurozone was countered by the US Initial Jobless Claims figures, which came in at 227k, lower than the consensus forecast 243k. That snapped a three-week rising streak in the US jobless figures, adding support to the dollar.
However, the dollar faces headwinds as US treasury bond yields fall. Benchmark 10-year bonds were down by 42 bps at the time of writing. The decline was precipitated by upbeat earnings releases, which have absorbed concerns over the impact of US presidential elections on the economy.
EURUSD forecast
EURUSD has upbeat momentum, and the upside will prevail if the pair stays above 1.0805. With the buyers in control, the first resistance could come at 1.0824. However, if the upward momentum extends, the pair could break above that level to take on the next hurdle at 1.0835.
On the downside, a move below 1.0805 will favour the sellers to take control. In that case, the first resistance could come at 1.0795. However, a stronger downside momentum could break below that level to test 1.0781. Meanwhile, the move would invalidate the upside narrative.
