The EUR/USD currency pair fell sharply under the 1.1500 barrier. This is its lowest point in more than a month as of the early hours of the American trading day. Combined with robust economic indicators from the US, this led to the recent downturn. This surprisingly good news has bolstered demand for the US dollar and sent the euro into a longer-term bearish trend against it.
The most recent computation has the EUR/USD pair’s Relative Strength Index (RSI) sitting just above 25. This represents a majorly oversold status. Most importantly, technical indicators make it clear that the downward trend is here for the long run. The 20 Simple Moving Average (SMA) is about to head further south crossing under the now-dormant 100 and 200 SMAs. Aside from the somewhat technical nature of this setup, it speaks volumes about how the market feels about the euro.
Today’s ADP report surprised many by indicating that the US private sector only added 104,000 new jobs in July. This job creation has caused a demand for the dollar and downward pressure on the EUR/USD. On top of that, the US economy grew a lot more than anyone had expected in the second quarter, growing at a 3% annual rate. This figure came in higher than the forecasted 2.4% and represented a huge turnaround from last quarter’s -0.5% contraction.
And the core Personal Consumption Expenditures (PCE) Price Index just shot up 2.5% in Q2. That’s down from 3.5% last quarter, underscoring a dramatic shift in consumer spending habits. The stage has been set by positive employment data, economic growth, and overall favorable conditions for the US dollar. Consequently, the dollar has appreciated against the euro.
Market participants are keenly attuned to the two-day conclave of the all-powerful United States central bank. They’re expecting a big announcement later today, so stay tuned. In fact, analysts are almost universally expecting the central bank to keep interest rates where they are. This is potentially a big decision for the EUR/USD, going forward.
The overhead resistance for EUR/USD is at 1.1510, 1.1555, and 1.1600. On the downside, the support levels are at 1.1470, 1.1420 and 1.1385. These new technical thresholds are going to be pivotal for traders looking to maneuver through the what will be inevitable volatility during the launch.
That original June advance estimate for job growth has now been revised. It’s now reflecting a loss of 23,000 jobs versus the previously reported loss of 33,000, a modest improvement in employment that might help in boosting market sentiment.