EUR/USD Forecast Update 3 Oct 19

After an initial dip, the EUR/USD is now back to familiar levels.

In the EUR/USD daily chart above, we note that the currency pair is now facing a test on the resistance region of 1.095. This is an area of influence which saw price action previously for a number of times.

Equities in the US, Europe and Asia faced bearish pressure this week as sell offs were seen on concerns of weak global economic trends. Political situations such as the US China Trade War, Brexit and Hong Kong Protests continue to exert a drag on sentiments.

From the economic data drawer, we saw reports of a stagnation of the Euro Area economy for the third quarter.

Various US PMIs also reported worse than expected figures that were below 50. This indicates contraction. The Purchasing Managers’ Index is a survey of purchasing managers and is important as the sentiment of purchasing managers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well while a cautious sentiment may see less business activities due to prudence.

The US ADP Non-Farm Employment Change was also lower than expected. ADP’s statistics is based on the payroll data of approximately 400,000 U.S. business clients. Therefore it is viewed by many as a possible early indication of the US Non-Farm Payroll result.

It is likely that these dovish US economic data added bearish pressure to the US dollar.

The US Non-Farm Payroll is due on Friday. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A low unemployment rate is an indicator of a healthy functioning economy. Investors and analysts will be monitoring closely. If there are further indications of a disappointing US economic climate, we may see the US dollar receive further bearish pressure.

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