EUR/USD Forecast: Euro looks to extend technical correction

EUR/USD recovered to the 1.0800 area at the beginning of the week.
Euro could face next technical resistance at 1.0840.
Thin trading conditions could limit the pair's recovery.

Eren Sengezer FXStreet

EUR/USD fell sharply on Friday and closed the seventh consecutive in the negative territory. Supported by the improving risk mood early Monday, the pair recovered to the 1.0800 area. With stock and bond markets in the US remaining closed in observance of the Labor Day holiday, however, EUR/USD could have a difficult time gathering directional momentum.

Euro price today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.17%	-0.27%	0.01%	-0.22%	0.20%	-0.05%	-0.12%
EUR	0.16%		-0.13%	0.17%	-0.06%	0.38%	0.11%	0.02%
GBP	0.28%	0.11%		0.28%	0.07%	0.48%	0.21%	0.15%
CAD	-0.01%	-0.17%	-0.29%		-0.23%	0.20%	-0.06%	-0.12%
AUD	0.20%	0.05%	-0.06%	0.23%		0.42%	0.17%	0.10%
JPY	-0.19%	-0.37%	-0.48%	-0.20%	-0.44%		-0.26%	-0.32%
NZD	0.04%	-0.09%	-0.23%	0.06%	-0.15%	0.25%		-0.06%
CHF	0.14%	-0.05%	-0.15%	0.13%	-0.08%	0.32%	0.07%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

The August jobs report from the US ramped up market volatility ahead of the weekend. Although the US Dollar weakened against its major rivals with the immediate reaction, it staged an impressive rally later in the American session and forced EUR/USD to stay on the back foot.

Nonfarm Payrolls in the US increased 187,000 in August, compared to analysts' estimate of 170,000. Other details of the report revealed that the Unemployment Rate rose to 3.8% from 3.5% as the Labor Force Participation Rate improved to 62.8% from 62.6%. These readings reaffirmed looser conditions in the labor market, while supporting the view of a 'soft landing.'

Nevertheless, the probability of the Federal Reserve raising its policy rate by another 25 basis points (bps) holds steady at around 30% after the August employment data, according to the CME Group FedWatch Tool. Hence, the sudden USD strength seen late Friday could be a product of profit-taking ahead of the long weekend.

Early Monday, the positive shift seen in market sentiment doesn't allow the USD to build on Friday's gains and helps EUR/USD edge higher. At the time of press, the Euro Stoxx 50 Index was up 0.9% on the day. In the meantime, the data from the Eurozone revealed that the Sentix Investor Confidence declined to -21.5 in September from -18.9 in August. This data failed to trigger a noticeable market reaction.

EUR/USD Technical Analysis

EUR/USD was last seen trading near 1.0800 (psychological level). In case the pair stabilizes above that level, it could face next resistance at 1.0840, where the 20-period and the 50-period Simple Moving Averages (SMA) on the four-hour chart align, ahead of 1.0870 (100-period SMA).

On the downside, first support is located at 1.0760 (static level) before 1.0740 (static level from February) and 1.0700 (psychological level9, static level).

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Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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