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Aayush Jindal

Key Highlights

  • EUR/USD struggled to stay above the 1.1900 support and declined to 1.1780.
  • A crucial bullish trend line is forming with support near 1.1805 on the 4-hours chart.
  • The US nonfarm payrolls increased 1,371K in August 2020, less than the last 1,734K (revised).
  • The Euro Zone Sentix Investor Confidence could improve from -13.4 to -10.8 in Sep 2020.

EUR/USD Technical Analysis

This past week, the Euro failed to clear the 1.2000 resistance against the US Dollar. As a result, EUR/USD started a fresh decline and traded below the 1.1900 support zone.

Looking at the 4-hours chart, the pair gained bearish momentum below the 1.1900 level and it even spiked below the 100 simple moving average (red, 4-hours). It tested the 1.1780 level and the 200 simple moving average (green, 4-hours).

It seems like the pair is finding strong bids near the 200 SMA and a crucial bullish trend line with support near 1.1805 on the same chart. If there is a close below the trend line and the 200 SMA, the pair could start a steady decline towards the 1.1720 support.

On the upside, the pair might face hurdles near the 1.1880 and 1.1900 levels. The 50% Fib retracement level of the downward move from the 1.2011 high to 1.1780 low is also near the 1.1896 level to act as a resistance.

To start a fresh increase towards the 1.2000 resistance, the pair must settle above the 1.1900 resistance zone in the near term.

Fundamentally, the nonfarm payrolls report for August 2020 was released this past Friday by the US Bureau of Labor Statistics. The market was looking for an increase of 1,400K in August 2020.

The actual result was lower than the forecast, as the total nonfarm payroll employment rose by 1,371K million in August. The last reading was revised down from 1,763K to 1,734K. More importantly, the US Unemployment Rate improved from 10.2% to 8.4%.

The report added:

These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it.

Overall, EUR/USD could struggle to recover above the 1.1900 resistance zone. Similarly, GBP/USD must settle above 1.3340 to resume its upward move.

Upcoming Economic Releases

  • Germany’s Industrial Production for July 2020 (MoM) - Forecast +4.8%, versus +8.9% previous.
  • Euro Zone Sentix Investor Confidence for Sep 2020 - Forecast -10.8, versus -13.4 previous.