(MENAFN- Daily Forex)
For the second consecutive day, the EUR/USD pair has been attempting to halt its recent losses ahead of a package of important and influential US economic data. The EUR/USD had retreated to the 1.1026 support level before rebounding to 1.1095 and stabilizing around 1.1085 at the time of writing. Eyes are firmly and cautiously focused on the announcement of US jobs figures, which will have a strong impact on the federal Reserve's decisions regarding US interest rates.
What is expected for the EUR/USD in the coming days?
In this regard, Fouad Razaqzadeh, Forex analyst at City Index, says:“Our modest bullish expectations for the Euro Dollar pair remain intact.”
His forecast comes as the EUR/USD exchange rate, like many other dollar-based pairs, has come under pressure after a strong August. Currently, the weakness appears to be a pullback within a broader uptrend that could attract more buying interest before another path towards the upside develops. The analyst added, "Since hitting its bottom in April, the EUR/USD pair has formed several higher lows and higher highs. Moreover, the 200-day moving average has started to turn positive." He explains that the rise in the euro has now broken several resistance levels and downward trend lines. In other words, the trend for the EUR/USD pair has been bullish.
As such, this will remain the case until we see a major reversal pattern or a breakdown in the market structure from the lows. So far, neither of these events has occurred, meaning that the outlook for EUR/USD remains bullish from a technical standpoint and that we prefer to look for bullish setups at or near support rather than bearish setups near resistance for trading ideas.
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In terms of technical outlook, the City Index analyst is looking for the current EUR/USD pullback to find potential support between 1.1000 and 1.1045, which has previously been resistance. Here, we also have the 21-day exponential moving average. Furthermore, we are watching for a bullish candlestick formation around this area this week to signal a resumption of the uptrend. If we don't see that, for example due to surprisingly strong US data. Also, it could pave the way for a deeper correction towards the next major support around the 1.09 level.
Moreover, her adds that any near-term recovery could face resistance around 1.1100, followed by 1.1140. Liquidity above the August high of 1.1200 is the next key target for bulls if the above resistance levels are broken.
According to the forex market trading, the EUR/USD pair is likely to see more volatility when the ISM services PMI is released on Thursday and the US jobs report on Friday, as markets will be looking for any further signs of a slowdown. It is difficult to determine the function of the dollar's reaction: we saw the US dollar strengthen and the market sell-off after Tuesday's disappointing data, which defied the typical rule that bad data = bad for the US dollar. Also, we believe that the rule still applies and that currency markets will show a more traditional reaction to the results. Weakness in US data is necessary to maintain pressure on the US dollar, while the upside for the US dollar should be limited in the event of any data surprises due to strong indications from the Federal Reserve that US interest rate cuts will begin this month. Ultimately, this makes me bearish on the dollar and therefore bullish on the EUR/USD outlook.
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