Euro's Bullish Momentum Dwindles Ahead of Key US Economic Data
The Euro (EUR) faced a setback against the US Dollar (USD) as it retreated below the 1.1150 mark after an unsuccessful attempt to breach the 1.1200 resistance level. This decline indicates a potential loss of bullish momentum in the near-term technical outlook for the EUR/USD pair.
Initially, the EUR/USD started the week positively, but the inability to maintain momentum above 1.1200 has resulted in trading within a narrow range below 1.1150 as of early Tuesday. The lack of buyer interest is evident, suggesting a cautious market sentiment.
In the current week, the Euro has shown varying performance against major currencies, with notable weakness against the Australian Dollar. A heat map illustrating the percentage changes of the Euro against other currencies highlights this trend, with the Euro struggling to gain ground.
Without significant macroeconomic data releases, the US Dollar has remained resilient, bolstered by comments from Federal Reserve Chairman Jerome Powell. Powell emphasized that the Fed is not in a rush to cut interest rates, indicating that future monetary policy decisions will be data-driven.
Later today, Eurostat is set to release the Harmonized Index of Consumer Prices (HICP) for September, with market expectations pointing to a year-on-year increase of 1.9% for the HICP and 2.8% for the core HICP. ECB President Christine Lagarde, during her testimony before the European Parliament, expressed confidence that inflation will align with the ECB's target in a timely manner, which may influence the upcoming monetary policy meeting in October. Should the core HICP rise less than anticipated, it could lead to a further weakening of the Euro against its major counterparts.
In the latter part of the day, the US economic calendar will feature the ISM Manufacturing PMI for September and the JOLTS Job Openings data for August. A significant drop in job openings, potentially falling to around 7 million, could exert downward pressure on the USD. Conversely, an unexpected rise in the ISM Manufacturing PMI, particularly above the 50 mark, may bolster the USD's position.
Technical analysis reveals that the Relative Strength Index (RSI) on the 4-hour chart has dipped below 50, indicating a loss of bullish momentum. On the downside, a strong support zone appears to be forming between 1.1110 and 1.1100, coinciding with the 100-period and 200-period Simple Moving Averages (SMA) and the Fibonacci 23.6% retracement level of the recent uptrend. Further support levels are identified at 1.1040 (Fibonacci 38.2% retracement) and 1.1000 (Fibonacci 50% retracement).
On the upside, immediate resistance is anticipated at 1.1160 (50-period SMA, 20-period SMA), followed by the critical level of 1.1200 and the July 18, 2023 high at 1.1275.