The EUR/USD forex pair has shown strong volatility in the last trading days, losing the 1.1800 psychological level. This performance comes against a backdrop of mixed economic data out of the United States. Though initial jobless claims have spiked, at the same time manufacturing sentiment unexpectedly soared to an all-time high. The pair has been making an all-out effort to retake its weekly lows. At a minimum, analysts are looking at its trading action at specific support and resistance levels.
In this most recent trading session, EUR/USD closed under this 20 Simple Moving Average, hovering below the 1.1810 level. This is now the second straight day that the pair has exchanged in the red, showing the difficult pressure continues. Even with these hurdles, it’s important to bottom line here that EUR/USD is NOT yet in a bear market. The 100 and 200 SMAs are below where we are now! This positioning, therefore, paints a rather modestly bullish outlook for the pair and capping its mid-term bearish potential.
On such an unexpected crumbling economic foundation came the September 13 release of economic data indicating an increase in initial jobless claims. They were up 231,000 from last week’s 264,000. This increase indicates a cooling or slowing demand in the labor market and further affects demand for the US dollar. In addition, the Philadelphia Fed Manufacturing Survey had a huge increase to 23.2, far surpassing the anticipated 2.3. This big step forward in manufacturing seems to have lifted spirits about our continuing economic recovery. Accordingly, it serves as a limited but non-negligible support for the US dollar.
With EUR/USD attempting to break through these key economic announcements, traders are looking for EUR/USD to find important support at 1.1780, then 1.1740, and finally 1.1705. If the two break these supports, it may indicate more extensive drops. Market players would want to closely watch resistance level at 1.1810, 1.1845, and 1.1890. Such levels might be an indication of future market recoveries.
The technical indicators and economic data will be closely intertwined. How these dynamics work together will be pivotal to the path of EUR/USD over the coming days. Although the recent trading pattern does identify an obvious weakness, all of the underlying makings are there suggesting that the pair has the potential to bounce back.