EUR/USD is holding recovery gains near 1.1000 in the early European session on Wednesday. The pair is finding support from a broadly weaker US Dollar, as investors stay cautious amid the US debt rating downgrade and ahead of the key US ADP jobs data.
The EUR/USD dropped modestly on Tuesday, and the bias is to the downside; however, the pair has been able to remain above an uptrend line and above the strong support area of 1.0950/60. A break below this support level could trigger an acceleration to the downside towards 1.0910, where the 55 and 100-day Simple Moving Averages await. On the upside, the Euro needs to rise above 1.1070 (20-day SMA) to improve the outlook.
On the 4-hour chart, the pair is rebounding from a trendline, and technical indicators are starting to show the Dollar’s strength is fading. The Momentum is moving north, approaching the middle line, and the Relative Strength Index (RSI) is bouncing from near 70. However, price remains under the 20-SMA. A recovery above 1.1000 would indicate that the Euro could recover further, with the focus turning to 1.1050.
The EUR/USD dropped towards last week’s lows, but it remained above and rebounded, trimming losses during the American session. The pair held above the important support area of 1.0950. The dollar stays resilient, but momentum appears to be fading. Incoming US data and market sentiment are likely to be key drivers.
The Final Eurozone PMI showed little change, with the headline remaining at 42.7, and Germany’s at 38.8. The German Unemployment rate fell in July to 5.6%. The interest rate market suggests that the odds of another rate hike from the European Central Bank (ECB) are below 40%.
The US Dollar lost strength versus the Euro following mixed US data. The JOLTS Job Openings report came in below expectations at 9.58 million. The ISM Manufacturing PMI in July rose to 46.4, below the market’s expectation of 46.8. The Price Paid index fell from 41.8 to 42.6, and the Employment Index declined from 48.1 to 44.4. Despite the numbers, US yields moved modestly higher.
The Greenback remains strong, but the momentum versus the Euro is waning. On Wednesday, the focus will be on more US employment data with the ADP report, with the focus set on Friday’s Nonfarm Payrolls.
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