The common currency hits nearly a three-week low of 1.1016 against the dollar. In the near-term, the euro may trade in the range of 1.0925-1.1200.

The euro was down more than 150 pips at 1.1016, the lowest level since mid-October. There is a lot of optimism regarding trade deal between US-China; hence, the US dollar has been enjoying some relief rally against the G10 currencies at the best level in the last four weeks.

“The Trump Twitter Feed was quiet on trade over the weekend, focusing on impeachment. US President Trump did suggest that no rollback of tariffs had been agreed. Trump speaks at the New York Economics Club (economists are social, and have a club) on Tuesday”, UBS reported.

Data review: 

  • Final Eurozone Manufacturing PMI at 45.9 in October. IHS Markit reported that “Although up from September’s 45.7 and the earlier flash reading, the index remained well below the 50.0 no-change mark to indicate a rate of contraction that was the second-sharpest in the past seven years.”
  • The other data was indicated by the latest data from the Sentix economic indices rises by 12.3 points to -4.5; the expected values even jump by 14.5 points to their highest level since May 2019.
  • The Eurozone Services PMI Index indicated a slightly faster rate of growth during October, IHS reported. However, at 52.2, compared to September’s 51.6, the index nonetheless posted the second-lowest reading since January.

 Data preview: Economic risks in the eurozone are tilted to the downside

This week’s economic calendar is little light. However, there are few important sentiment data surveys to focus on. The key economic data includes German ZEW economic sentiment, 1st estimate of Germany 3Q GDP, and EA CPI, but not market movers.

  • The German economy contracted in Q2 of 2019, and the weak sentiment data suggest negative growth continued in Q3 as well. Last quarter data indicated that the euro zone’s biggest country would be in a recession. Besides, hopes are pinned on new signs of recovery from China and the resilience of the US economy.

Moody’s Analytics said in a weekly report, “Our forecast is for a 0.1% q/q decline driven mainly by a 1.1% plunge in industrial production, the fifth contraction in a row. In contrast, the German services industry likely performed better, boosted by a still-strong consumer.”. 

TECHNICAL OVERVIEW

 The market seems to have spent the last week on re-assessing the US recession risk, Fed rate, and ECB’s next easing package. 

Richard Franulovich at Westpac said, “US recession risk has tumbled, on our modeling, the probability is down to a negligible 11% from 33%.”

The US dollar has been enjoying some relief rally against the common currency at the best level in the last four weeks. The euro again lost all the daily moving averages, whereas it manages to hold the immediate support zone of 1.1010-1.0990 levels.

The daily indicators given a mixed outlook as the stochastics improve but look set for a sell signal, especially the RSI lacks conviction.

As said, support held at the support zone has held firm overnight, keeping momentum in favor of the dip-buying strategy. However, traders should fasten the seat belt if the price action fails to breach 1.1200 in the next coming days.

To confirm a change in trend, the index needs to breakthrough 1.1200. On the downside, a break below the 1.0990 level may trigger losses towards 1.0950 before 1.0925.

View: We may see some consolidation between 1.1250-1.0925 down from 1.1000 in EUURSD after the recent fall. We still prefer Buying the dips favors the trend.

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

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