The EUR/USD exchange rate is at 1.136 at the start of October, and according to analyst and technical forecaster Richard Perry of Hantec Markets a major resistance level around 1.1695/1.1750 could stand in the way of further near-term gains.
After a rebound over the past few days, the pair continues to trade around a crucial crossroads.
Is this move a rebound into resistance and another chance to sell? Or is the dollar strengthening over and EUR/USD ready to resume a run higher?
In assessing the outlook, we continue to focus on the resistance band 1.1695/1.1750 and how the market responds to this and the resistance of the four week downtrend (falling today around 1.1785).
If the bulls can breach these two then the rebound will be seen as more sustainable.
The RSI has ticked higher but towards 50, whilst MACD lines are around neutral. Yesterday’s intraday reaction to moving back below was encouraging, with near term higher low support at 1.1685 now.
Continuing to close above 1.1695 will hold the crossroads. We still see a renewed corrective move back towards 1.1610 and below as likely, but the bulls are seriously questioning this outlook now.
The bulls fought back yesterday as a broadly positive tone to risk appetite trumped concerns markets are having over how the US Presidential Election could pan out.
How sustainable this improvement is could hinge on the talks between the Democrats and the White House over a fiscal support package.
The Democrats propose around $2.2trillion of funding, whilst Treasury Secretary Mnuchin and the White House propose around $1.6trillion. Although a vote was postponed last night, there is still a chance that fiscal support could be agreed upon as talks continue.
This is helping to prop up markets today.
You can also add in some broadly positive US data read through, with a better than expected ADP number boding well for Nonfarm Payrolls tomorrow.
This has pulled Treasury yields higher and the dollar is coming back under pressure once more (USD is a safe haven play primarily right now).
Subsequently, we see forex majors edging risk positive once more and equities gaining.
Watch also the precious metals ticking higher on the renewed dollar weakness. Once more we see major markets trading around dollar moves. Manufacturing PMIs are in focus now today.
The first trading day of the month is a day of the September manufacturing PMIs on the economic calendar.
The Eurozone final Manufacturing PMI is at 0900BST and is expected to be confirmed at 53.7 (53.7 flash September, 51.7 final August).
The UK final Manufacturing PMI is also expected to be unrevised at 54.3 (54.3 flash, 55.2 final August). The Eurozone Unemployment rate for August is expected to have increased to 8.1% (from 7.9% in July).
The Fed’s preferred inflation measure, US core Personal Consumption Expenditure is at 1330BST and is expected to pick up by +0.3% in August, which would increase the year on year rate to +1.4% (from +1.3% in July).
The US ISM Manufacturing is at 1500BST and is expected to tick slightly higher to 56.3 in September (from 56.0 in August).
There are another couple of Fed speakers scheduled for today. The FOMC’s John Williams (voter, centrist) speaks at 1600BST, whilst the FOMC’s Michelle Bowman (voter, leans hawkish) speaks again at 2000BST.