- Summary:
- The EURUSD trading pair has just registered its worst weekly run since early April, but a break below a long-term support spells more trouble.
EURUSD’s decline continued on Friday, this time orchestrated by a strong show by the US labour market. The euro has had a rough outing in recent days, losing 1.6 percent of its value against the dollar in the last five trading sessions. That marks the worst weekly return since early April, but the euro retains a bullish undercurrent, having accumulated successive gains against the dollar in the last three months.
US Non-Farm Payrolls figures rose to 254k in September, substantially above analysts’ median forecast of 147k. In addition, the August figures were revised upward to 159k from the previously reported 142k. Furthermore, unemployment rate fell by 0.1 percent to 4.1 percent in September, with the Average Hourly Earnings rising by 0.4 percent to beat the forecast rate of 0.3 percent.
Bearish EURUSD will struggle to recover
The strong show by the US economy eases the pressure on the Fed to announce another aggressive interest rate cut and brings tailwinds to the dollar. The EURUSD trading pair completed a double-top pattern this week, and it has recently crossed below the neckline on the daily chart. In addition, it has crossed below the lower Bollinger Band on the same time frame. Furthermore, it is below the 20, 50 and 100 Exponential Moving Average (EMA) levels, adding credence to the bearish view.
Meanwhile, the euro’s susceptibility is worsened by its recent key fundamentals. Eurozone Inflation fell to below the European Central Bank’s target rate of 2 percent in September. The rate fell from August’s 2.2 percent to 1.8 percent, effectively dashing prospects of an interest rate cut in the next two months.
EURUSD forecast today
The bears have the upper hand in the EURUSD market, with the Average Directional Index (ADX) reading at 26 confirming a strong downward momentum. The pair will extend the decline if resistance persists at 1.0999, and that could see the establishment of the first support at 1.0958. However, a stronger momentum could break below that mark to send EURUSD to test the second support at 1.0928.
Conversely, moving above 1.0999 will favour the buyers to take control. In that case, initial resistance could come at 1.1038. However, extended bullishness could enable a break past that barrier to invalidate the downside narrative and potentially test 1.1075.
