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Euro May Hold Up vs US Dollar Despite Worrying Technical Cues

Euro May Hold Up vs US Dollar Despite Worrying Technical Cues

2019-11-04 07:00:00
Dimitri Zabelin, Analyst
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US Dollar, Euro Price Chart, EUR/USD – Talking Points

  • EUR/USD uptrend showing signs of slowing momentum
  • Fundamental factors could help prolong the pair’s rise
  • What are key indicators look watch in upcoming session?

Learn how to use political-risk analysis in your trading strategy!

APAC Recap

The Australian and New Zealand Dollars along with crude oil prices and S&P 500 futures were all trading higher early into Asia’s Monday trading session. The source of buoyancy appears to be coming from revived optimism about the US-China trade war. Commerce Secretary Wilbur Ross has said talks are going well and that a “phase 1” deal is going to be reached very soon. Though he added a key caveat: things could “slip up”.

Eurozone, US Economic Data

EUR/USD may be able to hold onto its October 2019 uptrend despite technical cues signaling the pair is losing upside momentum. However, fundamental factors may help the pair sustain its rise. US durable goods and factory orders will be published which may fall short of expectations, given their connection to the manufacturing sector which has endured the most pain from the US-China trade war.

Softer prints could weaken the already-battered US Dollar which has undergone a significant selloff as market-wide optimism has re-prioritized returns over liquidity. Emerging market assets have rallied while anti-risk currencies like the Greenback and Japanese Yen have been placed at a discount. Their attractive nature as haven-linked assets has gone from magnifying capital to pushing it away.

Eurozone PMI and Sentix investor confidence data will also be published, though the former data point is also susceptible to the same ailments as its US counterpart. Furthermore, the Eurozone’s growth prospects do not offer a comforting outlook and these indicators may reinforce that narrative and fail to achieve their expected performance.

However, even if reports from both powerhouse economies miss their estimates, it could still result in a strong EUR/USD exchange rate. This is because while both may experience capital flight, the current sentimental environment could amplify the US Dollar’s decline more than the Euro’s.

EUR/USD Technical Analysis

EUR/USD’s uptrend since October could be losing steam as negative RSI divergence shows that upside momentum is fading. While this does not necessarily precede a reversal, it does show that the upside force is dwindling which could lead the pair to test the lower range of the uptrend. A break below it with follow-through could see the pair decline until it hits support at 1.1073.

Market Analysis of the Day: Will EUR/USD be Able to Sustain its Climb?

Chart showing EUR/USD

EUR/USD chart created using TradingView

EURO TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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