As of Friday morning, the EURUSD currency pair is witnessing a significant decline, hovering near its lowest point in almost a month. The bears are intensely focused on key support levels around the psychological mark of 1.10. This range not only represents a higher low from September 11 but is also critical given that it encompasses the 38.2% Fibonacci retracement from the recent upward trend between 1.0601 and 1.1204. If the pair breaks through this support, it could signal a reversal, indicating a downward pattern marked by a double top formation evident on the daily chart.
The initial Fibonacci support at 1.1069, representing 23.6%, has already been breached, further weakening the pair’s outlook. Additionally, the pair has intruded into the thick Ichimoku cloud, a condition that often signifies indecision or uncertainty in market trends. A weekly close within this cloud adds further negativity to the market sentiment surrounding EURUSD. The convergence of the 10-day and 20-day moving averages is foreshadowing a bearish crossover, intensifying selling pressure even more.
However, there is a slight counterbalance in the form of oversold conditions, which may provide some respite. With the strong support zone at 1.10 standing robust, a breakdown beneath this level would attract more selling, while a bounce back above the cloud top could alleviate immediate downside risks. Investors will be on the lookout for confirmation through a rally past the converged daily Tenkan and Kijun-sen levels, currently situated at 1.1111 and 1.1108, respectively.
Looking at the macroeconomic landscape, fundamentals are not favoring the Euro at this moment. Recent statements from the European Central Bank (ECB) indicate a potential for further interest rate cuts, especially after inflation stats have fallen below the target of 2%. Compounding this issue, the EU composite Purchasing Managers’ Index (PMI) has dipped below the contraction level of 50 in September, suggesting economic slowdowns.
The release of U.S. labor data for September is poised to be crucial in determining the fate of EURUSD in the immediate future. The Nonfarm Payrolls report is expected to show a moderate rise, from 142K in August up to a forecasted 147K for September. However, a surprise dip below 100K would imply a cooling labor market, likely resulting in increased speculation for a significant cut in Federal Reserve rates next month. Such an outcome would provide a boost to the Euro. Conversely, robust employment data would strengthen the U.S. Dollar, putting additional pressure on the Euro.
As traders navigate through these challenging conditions, key resistance levels are set at 1.1056, 1.1069, 1.1110, and 1.1144, while critical support levels are found at 1.1000, 1.0980, 1.0930, and 1.0907. The market’s next moves will hinge significantly on how these levels hold up against the backdrop of economic indicators and market sentiment.
In essence, the EURUSD pair currently stands at a pivotal juncture, influenced by a mixture of technical patterns and fundamental developments that could dictate its next trajectory. Investors would do well to keep a close watch on upcoming data releases and market reactions.