EUR/USD September 5 – Falls on Worrisome ECB, Strong US

EUR/USD tried to recover, but an attempt to break over the previous day’s highs failed, and the pair eventually fell to lower ground. The euro was hit by a worried Mario Draghi, that called the euro-zone recovery “green”. And the dollar got a boost from an excellent ISM Non-Manufacturing PMI as well as other solid figures. The case for QE tapering seems very strong, and the pair seems vulnerable.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• In the Asian session, EUR/USD dropped within the range to around 1.3160 and then recovered in the European session.

Current range: 1.3100 to 1.3175.

Further levels in both directions: 

• Below: 1.31, 1.3050 and 1.30.
• Above: 1.3175, 1.3240, 1.33, 1.3350, 1.3415, 1.3450, 1.3520, 1.3590 and 1.37.
• On the upside,  1.3240 proved itself as support.
• 1.3100 is holding on so far, but the pair is getting close.

EUR/USD Fundamentals

• 10:00 German Factory Orders. Exp. -0.7%. Actual -2.7%.
• 11:30 US Challenger Job Cuts. Actual 56.5%.
• 11:45 Euro-zone rate decision. Exp. no change. Actual: no change.
• 12:15 US ADP Non-Farm Payrolls. Exp. 175K, actual 176K. 
• 12:30 US jobless claims. Exp. 332K, actual 323K.
• 12:30 ECB press conference – Draghi sends the euro down (details below).
• 12:30 US Revised Nonfarm Productivity. Exp. +1.6%. Actual +2.3%.
• 14:00 US ISM Non-Manufacturing PMI. Exp. 55.2, actual 58.6 points, with strong employment component.
• 14:00 US Factory Orders. Exp. -3.3%. Actual -2.4%.

* All times are GMT.

For more events and lines, see the Euro to dollar forecast.

EUR/USD Sentiment

• Strong case for tapering: ADP provided an OK beginning, showing a continuation of the trend. Jobless claims joined in with the same strong and solid data, and the ISM Non-Manufacturing PMI was a big positive surprise: not only the headline reached the highest since 2005, but the employment component increased to 57.7, reflecting strong growth. New orders, which are considered forward looking, climbed above 60, reflecting hot growth. Any number above 50 means expansion. All eyes are on the king of forex trading: Non-Farm Payrolls, and the expectations are high. Unless we get an unexpected disaster such as a sub 100K figure, the NFP will likely cement the QE tapering and make a bigger impact on currencies. See how to trade the NFP with EUR/USD.
• Only a green recovery in Europe: ECB president Mario Draghi said he is “not enthusiastic” about the return to growth and warned about money markets. In addition, the ECB lowered its growth forecast for 2014. A rate cut is still on the cards, and forward guidance is here to stay. On this background, the euro remains weak, and not only against the dollar.
• Syrian tensions subside, for now: A US military strike against Syria is on hold, after President Obama said on the weekend that he will seek Congressional approval before taking any action against Syria. With Congress in recess until September 9th, a military strike could be delayed until mid-September or even later. Russia has warned the US not to take any unilateral action against Syria, so we can expect tensions to increase, bringing with it market volatility. The G-20 leaders are meeting in Saint Petersburg, and there are clear differences between the countries.

Further reading:

• EURUSD Could Be Forming A Major Turning Point For The Year-Elliott Wave Analysis
• Forex Analysis: EUR/JPY Continues Consolidation within Clear Triangle Pattern

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