The common currency has started developing a base between 1.0900-1.0925 levels after a straight fall from 1.1100 levels. All near-term indicators have remaining bearish which restrict the headroom in the data-packed week ahead. Behind the past two-week central bank meetings, traders shift the focus back to macro data.

In data terms last week, EA PMIs printed below estimates whereas data from Germany supported the common currency not to fall further. 

Data preview: Final EZ PMs and NFP data. 

Behind the past two-week central bank meetings, traders shift the focus back to macro data. The EA focus this week will be on the Final PMI readings and NFP report. The brand new week going to start with the PMI readings and ends with the big data non-farm payroll. After last week’s weak Manufacturing and Service PMI data, the financial markets are expecting a weak NFP data. 

Turning to the EA data, all eyes on the Flash PMI data. ING said, “All eyes on service sector strength.” 

In a note to clients ING also said, “The September PMI showed a marked weakening in service sector activity, increasing worries that the manufacturing downturn is starting to spill over to the wider economy.”

 Commenting on the PMIs, IHS Markit said, “In Europe, PMI updates will be eyed for signs of recession risk in Germany, Italy and the UK, the latter also seeing updated estimates of second quarter GDP.” 

TECHNICAL VIEW

The EURUSD extended the losses last week as mixed global clues hurt sentiments. The month-end positioning data suggests short interests have reduced and is expected to find a weekly bottom between 1.0900-1.0850 levels. Overall month-end positioning data suggests medium sell USD. 

  •  CitiFX Month-End rebalancing reported, “The net FX impact from the signal is poised to be selling of USD against GBP and EUR at month-end.”
  • BNP Paribas reported in the Macro Quant Strategy report “The FX Fund Position Tracker components turning more bullish on the EUR.” 

 As shown in the below hourly chart, the price has been capped between 1.0960-1.0965 a decisive breakout above needed to bounce towards the key resistance level located at 1.1025 levels. The combination of dovish ECB and escalating trade tension between US-China offers limited head-room towards 1.1100 and 1.1250 into the Q4 2019. 

Last week the common currency managed to hold the support zone 1.0900-1.0925 levels, since then it is consolidating between 1.0900-1.0965 level. If the dollar weakness continues, the EURUSD might develop an inverse H&S pattern on the H1 chart. 

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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