EUR/USD Analysis – October 06, 2021

Brace for ADP Non-Farm Employment Change

The EUR/USD pair ended the day at $1.1621, having reached a high of $1.1641 and a low of $1.587. The EUR/USD continued with its bullish momentum for the third consecutive session on Monday as the U.S. dollar was weak across the board despite the prevailing energy crisis in Europe. The U.S. Dollar Index, which measures the value of the greenback against a basket of six major currencies, fell on Monday to 93.68, as inflation concerns rose in the market. The U.S. dollar remained under pressure despite a relatively risk-off market mood and the expectation that the Fed will begin tapering bond purchases next month.

The main reason behind the declining price of the U.S. dollar could be attributed to the risk of the U.S. defaulting on its debt as Democrats and Republicans remain divided over the best way to raise the debt ceiling. Tensions increased on Monday as the time to reach a deal on the $28.4 trillion debt ceiling by the U.S. federal government was getting closer. Just two weeks remained to reach a deal, but both parties were reluctant to join each other in voting.

Meanwhile, President Joe Biden has called Republicans to join Democrats in voting to raise the debt ceiling in the next two weeks. All these developments kept the U.S. dollar under pressure, which pushed the EUR/USD currency pair higher on Monday.

On the data front, at 12:00 GMT, the Spanish Unemployment Change for September came in as -76.1K against the previous -82.6K. At 13:30 GMT, the Sentix Investor Confidence declined to 16.9 against the forecasted 18.5 and weighed on the single currency Euro and caped further gains in EUR/USD. From the U.S. side, at 19:00 GMT, factory orders from August remained unchanged at 1.2%.

On Monday, during the Eurogroup meeting in Luxembourg, the European ministers put forth the agenda of the energy crisis. Growing international demand and a sudden economic recovery have prompted a surge in natural gas prices. Energy prices increased by six-fold in less than one year, from €16 megawatts per hour in January to €98 by late September. The meeting suggested that the willingness of East Asian counties to pay more for fuel has exacerbated the trend during the summer when high temperatures pushed people to use air-conditioning and cooling systems.

After the release of September’s inflation figures from Europe, the energy crunch took hype as the inflation figures reached 3.4%, which was far from the 2% target of the ECB. The inflation rate for energy prices exceeded 17%. The unbearable spike in energy prices has weighed heavily on EU citizens and companies as well, which has raised concerns over the economic growth of the sector.

EUR/USD Intraday Technical Levels

Support Resistance

1.1578 1.1618

1.1560 1.1638

1.1539 1.1657

Pivot Point: 1.1599

EUR/USD - Technical Outlook

On Wednesday, the EUR/USD currency pair is trading at 1.1585 level and it’s gaining immediate support at 1.1580 level. Such support is extended by the double bottom pattern, and a break below this level exposes the pair to the 1.1563 and 1.1537 levels. On the higher side, the breakout of the 1.1600 level exposes the EUR/USD pair towards 1.1645.

On the lower side, the bears may find support at the 1.1560 level, whereas the violation of 1.1560 exposes the pair towards 1.1538 and 1.1523 levels. The EUR/USD has already violated the upward trendline and formation of a bearish engulfing candle is supporting a selling bias in the pair.

The RSI and MACD are in support of a selling trend, therefore, the bearish bias dominates below 1.1599 level today. All the best!