- For the second day in a row, the price of EUR/USD is exposed to profit-taking selling operations after testing the 1.0695 resistance level at the beginning of this week’s trading.
- Obviously, the ongoing selling operations pushed it towards the support level of 1.0541 in early trading today, and it is stabilizing around its losses at the time of writing the analysis.
- Today ew expect the announcement of the European Central Bank’s policy decisions and a new round of important and influential American economic releases.
Data in Focus
Before that, purchasing managers' indices for the manufacturing and services sectors in the euro zone were mixed, raising investors' concern that the European Central Bank is likely to keep its policy unchanged for a longer period. Meanwhile, preliminary US PMI readings beat estimates, reflecting stronger growth in the manufacturing and services sectors. Consequently, this indicates that the Federal Reserve may consider raising US interest rates again before the end of the year, thus strengthening the dollar against other major currencies.
Meanwhile, The European Central Bank (ECB) will announce its monetary policy decisions today, so hawkish statements from policymakers could be enough to tighten expectations again, leading to more upside for the euro against the dollar.
Even though the yield on the 10-year US Treasury note remained comfortably below the psychological 5% zone, the US dollar was able to recover against most major currencies as the preliminary US Purchasing Managers' Index (PMI) for October indicated that the world's largest economy was faring better than its counterpart in the euro area expected during the first month of the fourth quarter. Hardly, the manufacturing index avoided contraction for the first time since April, with the composite index rising to 51.0 from 50.2. This came in stark contrast to the euro zone's PMIs for the month which were released earlier today and painted a bleaker picture than they did in September.
Accordingly, the divergence allowed EUR/USD traders to jump into the move near the crossroads of the pair's 50-day moving average and the key resistance barrier at 1.0665, suggesting that the recent rebound may have just been a corrective wave within the broader downtrend. Therefore, the decline may extend, and the pair may soon retest its lowest levels this month if Thursday’s data reveals the amazing performance of the US economy in the third quarter.
EUR/USD Today Expectations
EUR/USD recently rose above the resistance level at 1.0600 and reached a high near 1.0700 before pulling back during its rise. The price has come back down to retest the previous ceiling, which appears to be holding up as a floor. Consequently, this happens to coincide with the 61.8% Fibonacci retracement level which could increase its strength as a floor. However, if this is enough to keep losses under control, EUR/USD could make its way back to the high or higher.
Technically, the 100 SMA is above the 200 SMA to indicate that there is an upward shift but lacks momentum, or the support is more likely to hold rather than breakout. Also, the 200 SMA is located near the 61.8% Fibonacci level to add another additional layer of support on a larger decline. Meanwhile, Stochastic is heading higher to show that buyers are in control, but the oscillator is approaching the overbought zone and is starting to rise. Therefore, this suggests that sellers may soon regain control. On the other side, The RSI is moving lower and has a little room to decline before reaching the oversold zone to indicate exhaustion among the bears. Finally, a break below the 200 SMA could be enough to put EUR/USD in a downtrend again.
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