EUR/USD: Break Above 1.1800 Holds The Key
- EUR/USD started an upside correction after trading as low as 1.1612.
- A major bearish trend line is forming with resistance near 1.1775 on the 4-hours chart.
- The Euro Zone Services PMI could remain at 47.6 in Sep 2020.
- The US ISM Services PMI might decline from 56.9 to 56.0 in Sep 2020.
EUR/USD Technical Analysis
After a steady decline, the Euro found support just above the 1.1600 level against the US Dollar. EUR/USD started an upside correction above 1.1700, but it is facing many important hurdles.
Looking at the 4-hours chart, the pair traded as low as 1.1612, and it settled below both the 100 simple moving average (red, 4-hours) and 200 simple moving average (green, 4-hours).
This past week, the pair started a strong recovery above the 1.1680 and 1.1700 resistance levels. There was also a break above the 50% Fib retracement level of the downward move from the 1.1871 high to 1.1612 low.
However, the pair faced a strong resistance near the 1.1775 level and the 100 simple moving average (red, 4-hours). The 61.8% Fib retracement level of the downward move from the 1.1871 high to 1.1612 low also acted as a resistance.
More importantly, there is a major bearish trend line forming with resistance near 1.1775 on the same chart. Therefore, the pair must break the 1.1775 and 1.1800 resistance levels to move into a positive zone.
If the pair struggles to continue higher above 1.1775 or 1.1800, there is a risk of a fresh decline. An initial support on the downside is near the 1.1680 level, below which the pair could revisit the 1.1612 swing low.
Fundamentally, the US nonfarm payrolls report for Sep 2020 was released this past Friday by the US Bureau of Labor Statistics. The market was looking for an increase 850K in Sep 2020.
The actual result was lower than the forecast, as the US nonfarm payrolls climbed only 661K. Conversely, the last reading was revised up from 1,371K to 1,489K. Moreover, the Unemployment Rate declined from 8.4% to 7.9%.
The report added:
In September, the unemployment rate declined by 0.5 percentage point to 7.9 percent, and the number of unemployed persons fell by 1.0 million to 12.6 million. Both measures have declined for 5 consecutive months but are higher than in February, by 4.4 percentage points and 6.8 million, respectively.
Overall, EUR/USD must surpass 1.1800 to continue higher. Similarly, GBP/USD is facing a strong resistance near 1.3000.
Upcoming Economic Releases
- Germany’s Services PMI for Sep 2020 - Forecast 50.8, versus 49.1 previous.
- Euro Zone Services PMI for Sep 2020 – Forecast 47.6, versus 47.6 previous.
- UK Services PMI for Sep 2020 – Forecast 60.1, versus 55.1 previous.
- US Services PMI for Sep 2020 – Forecast 54.6, versus 54.6 previous.
- US ISM Services PMI for Sep 2020 – Forecast 56.0, versus 56.9 previous.