EUR/USD Current Price: 1.1073
- After ECB’s stimulus package, the Fed is expected to cut rates by 25bps.
- Better-than-expected US data released Friday brought relief to USD bulls.
- EUR/USD upward potential limited, the positive momentum could return above 1.1120.
The EUR/USD pair moderated its advance on Friday, compliments to stronger-than-expected US data, finishing the week anyway with gains around 1.1070. The pair peaked at 1.1109 at the beginning of the day, as a result of the rally triggered by the European Central Bank monetary policy announcement on Thursday. The bullish momentum of the pair faded on the back of encouraging US data, as August Retail Sales were up by 0.4% against the 0.2% forecasted, while July reading was upwardly revised to 0.8% from 0.7%. Also, the preliminary estimate of the September Michigan Consumer Sentiment Index came in at 92.0, better than the 90.9 expected and bouncing from August 89.8.
It’s all about central banks
The ECB decision had had different readings. Some analysts believe that what was announced may not be enough to revert slowing growth and that at given the extent of the package, the ECB will remain on hold for long. Others think that given that the announcement widens the divergences with the Fed, somehow US policymakers will have to take steeper measures.
In the data front, there’s little to take care of this Monday, as nor the US, neither the EU will release relevant data. Speculative interest will be waiting for Wednesday when the US Federal Reserve will have its monetary policy meeting. At this point, the Fed is expected t announce a 25bps without compromising to further cuts ahead.
EUR/USD short-term technical outlook
The EUR/USD pair finished the week around the 61.8% retracement of its latest daily decline, having failed to sustain gains above it for the third time in the last two weeks. The daily chart shows that it established a handful of pips above a directionless 20 SMA, but also that it holds below bearish larger ones. Technical indicators hold within negative levels, the Momentum aiming higher but the RSI flat at 49, all of which suggest that the upward potential remains limited. In the 4 hours chart, attempts to regain the upside were rejected by selling interest around the 200 SMA, although the 20 and 100 SMA remain below the current level and converging with the 50% retracement of the mentioned slide, reinforcing the 1.1040/50 region as support. Technical indicators hold within positive territory, although the RSI has already turned south, also suggesting that buyers have decided to step aside.
Support levels: 1.1045 1.1000 1.0955
Resistance levels: 1.1085 1.1120 1.1160
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