With the beginning of this week's trading, the EUR/USD is still stable around 1.1655, where it closed last week. The largest economy in Europe is suffering from the effects of the pandemic and the disruption of supply chains, which are leading to a strong and shocking inflation wave.
The apparent divergence in economic performance and the future of monetary policy tightening between the United States and the Eurozone remains in favor of the US dollar's eventual gains. This week, the euro pairs will await the European Central Bank's announcement of its monetary policy decisions, and amid strong expectations to maintain interest rates, more attention will be paid to the tone of the monetary policy statement and the statements of ECB Governor Lagarde.
The EUR/USD is being influenced by the announcement that the preliminary EU Markit Manufacturing PMI for October exceeded expectations at 57 with a reading of 58.5. On the other hand, the Services PMI and the Composite PMI fell from expectations at 54.7 and 54.3, respectively, with actual results reported at 55.5 and 55.2, respectively. German Markit preliminary Manufacturing PMI came in at 58.2, beating expectations of 56.5, while the Services PMI and Composite PMI came in below expectations. The preliminary European Consumer Confidence for October exceeded -5 with -4.8.
From the US, initial jobless claims for the week ending October 15 exceeded expectations of 300,000 with a decrease of 290 thousand claims, while last week's continuing claims exceeded the expected number of claims of 2.55 million for a total of 2.481 million. On the other hand, the Philadelphia Fed Manufacturing Survey for October missed expectations by 25 at 23.8, while Existing Home Sales for September outperformed the estimate (monthly) of 6.09 million with 6.29 million.
Technical analysis of the pair
In the near term, and according to the performance on the hourly chart, it appears that the EUR/USD is trading within an ascending channel formation. This indicates a significant short-term bullish momentum in market sentiment. Therefore, the bulls will look to ride the current rally towards 1.664 or higher to the 1.1691 resistance. On the other hand, the bears will target potential pullbacks at around 1.1607 or lower at 1.1577.
In the long term, and according to the performance on the daily chart, it appears that the EUR/USD is trading within the formation of a descending channel. However, it has recently bounced off trend line support to avoid falling into oversold levels. Therefore, the bulls are looking to extend the current rebound towards 1.1740 or higher to the 1.1841 resistance. On the other hand, the bears can target long-term profits at around 1.1522 or lower at 1.1406.
