EUR/USD Price Forecast: Corrective advance losing steam

EUR/USD Current price: 1.0796

• European growth-related data posted modest improvements, not enough to spooke recession fears.
• S&P Global will publish the US flash October PMIs after Wall Street’s opening.
• EUR/USD corrective advance seems complete, additional losses once below 1.0750.

The EUR/USD pair met some demand during European trading hours on Thursday, helped by receding US Dollar strength. The market’s mood remained sour throughout the Asian session, as investors maintained the focus on China’s battered economy and the uncertainty surrounding the US presidential race. Euro’s advance, however, was modest, as local data still point to an economic setback.

Germany reported that the Hamburg Commercial Bank (HCOB) Flash Composite Purchasing Manager Index (PMI) Output Index ticked up from September’s seven-month low of 47.5 to 48.4 in October. Manufacturing output in the same period improved to 42.6 from 40.6, while the services index rose from 50.6 to 51.4. Nevertheless, the official report noted that “conditions continued to worsen across Germany’s private sector at the start of the fourth quarter, with businesses reporting further decreases in output and employment amid a backdrop of weak underlying demand.”

In the same period, the Eurozone HCOB Composite PMI ticked marginally higher, printing at 49.7. Manufacturing output improved by more than anticipated, with the index hitting 45.9, still indicating contraction. Additionally, the Services PMI resulted at 51.2, worse than the previous 51.4 and the expected 51.6. Finally, it is worth adding that the employment sub-index deteriorated for its fifth consecutive month and stands at 49.1.

Meanwhile, a slew of European Central Bank (ECB) officials hit the wires amid their participation in the International Monetary Fund (FMI) meetings

Across the pond, the United States (US) published Initial Jobless Claims for the week ended October 18, which rose by 227K, better than the 242K expected. Also, the Chicago Fed National Activity Index printed at -0.28 in September, worse than the previous -0,01. After Wall Street’s opening, S&P Global will release the preliminary estimates of the October PMIs and New Home Sales.

EUR/USD short-term technical outlook  

The daily chart for the EUR/USD pair shows it holds in the green, but also that it could not retain the 1.0800 threshold. The pair peaked at 1.0807 before retreating to the current 1.0790 price zone and keeps developing below all its moving averages, a sign that bears retain control. Even further, a firmly bearish 20 Simple Moving Average (SMA) is about to cross a flat 100 SMA, both at around 1.0950. Finally, technical indicators ticked marginally higher within negative levels, reflecting the ongoing upward correction rather than suggesting another leg north.

In the near term, and according to the 4-hour chart, the risk remains skewed to the downside. A bearish 20 SMA provides resistance around the intraday high, while the 100 and 200 SMAs keep heading firmly lower, far above the shorter one. Technical indicators, in the meantime, have completed their corrective advances, nearing their midlines before turning lower. A break below the 1.0750 region is required to confirm another leg south in the upcoming sessions.

Support levels: 1.0750 1.0710 1.0660

Resistance levels: 1.0800 1.0840 1.0885