EUR/USD trims gains, back to 1.1730

EUR/USD now faces some selling pressure, giving away part of its earlier advance and returning to the 1.1740-1.1730 band on the back of some recovery in the US Dollar. In the meantime, earlier US data for the month of September showed discouraging prints from the ADP report and a slight improvement in the ISM Manufacturing PMI.

EUR/USD Technical Overview

The EUR/USD pair is up for the day, albeit posting limited gains. The daily chart shows it is battling to overcome a directionless 20 Simple Moving Average (SMA) for a third consecutive day. At the same time, technical indicators remain within neutral levels, lacking clear directional strength. Finally, the 100 and 200 SMAs head north far below the current level, maintaining the long-term risk skewed to the upside.

The near-term picture shows the pair seesaws between familiar levels, without finding its way. In the 4-hour chart, EUR/USD remains trapped below a flat 100 SMA, while above an also directionless 200 SMA. The 20 SMA, in the meantime, gains modest upward traction, although not enough to suggest an upcoming advance. In the meantime, technical indicators offer downward slopes but hold above their midlines, reflecting the latest bearish peak rather than suggesting an upcoming slide. The pair set an intraday high at 1.1778, the level to beat to encourage additional buying interest.

Support levels: 1.1710 1.1685 1.1650

Resistance levels: 1.1780 1.1830 1.1880

Fundamental Overview

Risk aversion dominates financial boards on Wednesday, keeping the US Dollar (USD) under pressure and boosting demand for safe-haven Gold. The United States (US) government effectively shut down at midnight, as Republicans and Democrats failed to clinch a deal on a funding bill. As a result, furloughs and data delays are coming in the US, fueling uncertainty.

The EUR/USD pair suffered a near-term setback after the release of macroeconomic data. On the one hand, the Eurozone released the preliminary estimate of the September Harmonized Index of Consumer Prices (HICP), which rose at an annualized pace of 2.2%, as expected. The news failed to impress market players, albeit American data did.

The US ADP Employment Change report showed that the private sector lost 32,000 jobs in September, much worse than the 50,000 jobs anticipated by market participants. At the same time, the August reading was revised to minus 3,000 vs the previous estimate of a 54,000 increase. The Greenback found near-term demand with the news, pushing EUR/USD towards intraday lows at around 1.1720, which, anyway, quickly changed course.

Coming up next is the ISM Manufacturing Purchasing Managers’ Index (PMI) forecast at 49 in September, up from the 48.7 posted in August, yet still within contraction levels.