• Broad US downside risk is supporting the EURUSD
  • Not seen such a significant bounce for nearly 14 months
  • We may see some consolidation

FX market this week: The economic calendar is heavy this week. ECB policy meeting (Thu)and Flash PMIs among top-tier events to keep forex traders busy. Markets seem to have spent the last week on an eventful basis, i.e., Brexit developments. Moving forward to this week (Oct22-25), it is going to be a busy economic week and could raise the common currency volatility, but not significant, though.

The first half of this week is data empty; the common currency is taking support from Global cues and the dollar movement. We may see some consolidation in EUURSD after the last three week’s surge. In the absence of any significant data events and global cues, traders are waiting for a signal to move the common currency.

Data review:

Looking at the last week’s data releases, the EW Indicator of Economic Sentiment Stands at Minus and remain well below the long-term average of 21.4 points, ZEW reported.

·       According to the official release, the ZEW Indicator of Economic Sentiment for Germany recorded a very slight decrease of 0.3 points in October 2019 and now stands at minus 22.8 points. It suggests that financial market experts continue to expect a further deterioration of the German economy.

·       The other data annual inflation was down 0.8% in September.

Data preview: Focus is again on Flash PMI data readings and ECB policy meeting. We will get PMI figures from the EA.  

“We expect the current manufacturing recession to drag into Q4 19, as trade war effects continue to work their way through the supply chain and since order-inventory dynamics are weighing on production” Danske Bank reported in a weekly note to clients.

Turning to the ECB meeting (Thu), we don’t expect any policy changes, as this will be the Draghi’s final meeting before leaving office on Oct 31. We expect all three major policy rates to remain unchanged.

TECHNICAL OUTLOOK

The common currency rebounded last week, too, as the dollar underperformed on the third consecutive week.

Over the past three weeks, the common currency rallied more than 250pips. We have not seen such a significant bounce for nearly 14 months. The last significant rally for three weeks happened in August 2018. 

According to the daily chart, the key resistance level is placed at 1.1200 and 1.1250. Flipside, significant pivotal level, which will act as crucial support, is placed at 1.1110, followed by 1.1060 and 1.0990 levels.

As we highlighted a couple of times in our weekly articles, the risks of a new decline to supports located at 1.0925-1.0900 have eased dramatically. We may see some consolidation between 1.1250-1.1000 in EUURSD after the last three week’s surge. Buying the dips favors the trend.

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

A question? Let us help!

A KTM Analyst is ready to assist you, click on the comment section below