The latest economic indicators coming out of the U.S. paint a picture of a fragile labor market. Consequently, the EUR/USD currency pair is under growing downward pressure and mounting trade deficits. EUR/USD daily chart Eur/USD daily chart EUR/USD sentiment comments on the daily chart EUR/USD downside risk is clear. The pair is trading below all its four-hour moving averages. The pair has touched new daily lows in the 1.1630 area. This unexpected shift is leading analysts to revise their expectations.
The technical indicators for EUR/USD are very bearish. The 100 Simple Moving Average (SMA) is creeping horizontally in the vicinity of 1.1520. At the same time, the 20 SMA is located around 1.1665 acting as a dynamic resistance. The constant southward direction of the 20 SMA shows that bearish pressure in the pair is mounting. Technical indicators have steeply rolled over, currently remaining stuck just below their MIDLINES. This movement continues to strengthen the bearish sentiment surrounding EUR/USD.
US economic data has recently added to the bullish strength of the US dollar. All of this comes despite disappointing jobs numbers. First, according to the ADP Employment Change report, the private sector added only 54,000 new jobs in August. This amount was underwhelming. Initial jobless claims for the week ending August 31 increased to 237,000, evidence of a softening labor market. The arrival of these dismal numbers has only increased fears about the health of the US economy as a whole.
The PMI is forecasted to remain unchanged at 51 for August. This points to ongoing services expansion, even if it is at a muted rate. In July, the Goods and Services Trade Balance was in deficit by $78.3 billion. This positive news is tempered with deeper economic realities brewing on the horizon for the U.S. This toxic cocktail of bad news has propelled a strong bid for the US dollar, especially at the start of US trading sessions.
The Eurozone has done no better – news that retail sales plunged by 0.5% in July came out just yesterday. The cumulative effect of this sharp drop has begun to substantially strain the Eurozone economy. Consequently, pessimistic sentiment about the euro is on the rise. As a result, traders in both markets are laser-focused on each region’s economic data releases as they calculate risks to currency values.
Market participants will want to monitor important EUR/USD resistance levels. You can see them at 1.1665, 1.1700 and 1.1745. On the flip side, resistance is found at 1.1620, 1.1590, and 1.1550. How these levels interact will be key as traders look for clues as to what is coming next, especially with more key economic releases on the horizon.
Now the market is in a furious race to digest today’s all-important economic data. We’re looking forward to seeing how these factors continue to influence and inform future trading decisions. EUR/USD could even resume its fall, particularly if euro-zone economic weakness persists. Any additional bad news from either area could add to this momentum.