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The EUR/USD exchange rate put in a solid 0.66% jump on Tuesday, leaving the pair at 1.1735 at the time of writing mid-week. Analyst and technical forecaster Richard Perry of Hantec Markets says a heavy band of resistance could mean follow-on gains for the Euro are difficult to achieve.
A strong rebound in yesterday’s session leaves the market testing a crucial resistance around 1.1750.
We have discussed the importance of 1.1695/1.1750 resistance as the band of old support has become overhead supply. Yesterday’s rally is testing this band, but as the market rolls over slightly this morning, it is still intact as a basis of resistance.
The corrective outlook across momentum indicators remains in place on a medium term basis and having broken so decisively below 1.1695 last week, we look to use near term rebounds as a chance to sell.
This still looks to be an opportunity to sell rather than the start of a big EUR recovery.
A four week downtrend falls around 1.1795 today, whilst RSI is into the mid-40s.
If the market begins to form negative candles once more on the daily chart, we would be looking to sell for a retest of 1.1610.
Moving decisively above 1.1750 would hamper the corrective outlook, but the selling pressure of lower highs and lower lows remains viable whilst under the four week downtrend.
The positive sentiment that was starting to build through major markets has taken a hit again in the wake of the first Presidential debate.
President Trump was never going to go easy on his opponent Joe Biden, but the way that the debate panned out points towards a significant increase in political risk in the weeks and potentially months ahead.
An acrimonious exchange between the candidates ensued, where it is clear that the incumbent, President Trump, could look to win at all costs, even if that means challenging to result in the Supreme Court.
Early suggestions are that the uncertainty over a potential winner in the election could rumble on well beyond 3rd November (where a winner would be declared).
Political risk means market sentiment falters.
Treasury yields are falling this morning, whilst the US dollar in its role as a safe haven is outperforming. Equities are under pressure, with the risk positive mood across forex majors having turned sour again.
The Japanese yen seems to also be a winner if this trend continues. Early this morning, the final reading to UK GDP for Q2 showed a slight positive revision to -19.8% (from -20.4%), whilst the UK Current Account for Q2 came in a -£2.8bn which was a marked improvement on the -£21.1bn of Q1 but slightly worse than the expected -£0.4bn. Traders will be watching out for ECB President Lagarde this morning and the ADP jobs number later.
here are several US data points on the economic calendar today.
The ADP Employment change is at 1315BST and is expected to show an increase to +650,000 jobs in September (up from +428,000 in August).
The US final Q2 GDP is at 1330BST and is not expected to show any revision from the -31.7% annualised prelim reading (aft er fall of -5.0% in Q1).
US Pending Home Sales are at 1500BST and are expected to show monthly growth of +3.4% in August (after +5.9% growth in July). The EIA crude oil inventories are at 1530BST and are expected to show a build of +1.4m barrels (after a drawdown of -1.6m barrels last week).
There one notable central bank governor and a couple of Fed speakers to watch out for today.
ECB President Christine Lagarde speaks early at 0820BST, where her comments on faltering inflation will be watched for. Later in the day, the FOMC’s Neel Kashkari (voter, dovish) speaks at 1600BST, whilst the FOMC’s Michelle Bowman (voter, leans hawkish) speaks 1840BST.