EUR/USD Analysis – October 25, 2021

Upward Channel Supports Buying Trend

The EUR/USD is steady this week, around 1.1645 at daily resistance, with the US dollar attempting to hold up. Since the dollar index places a one-year high during the last week, investors have grabbed profits as they build expectations for faster rate increases in other currencies. Nevertheless, the dollar regained some of its losses on Friday, and Treasury yields fell, as Federal Reserve Chairman Jerome Powell stated that the US central bank should begin cutting asset purchases shortly but not yet hike interest rates.

However, there were no major shocks in his remarks, although he stated that the effects of global supply-chain restrictions have a longer-term influence on prices. Nonetheless, he believes that inflation will eventually return to 2%. This resulted in an immediate sell-off in US rates, with 10-year UST yields falling dramatically to 1.63 percent. Equities in the United States were also down.

In the United States, the Markit Manufacturing PMI fell more than expected in October, to 59.2 from 60.5 expected. On the other hand, the service index improved more than expected (to 58.2 vs. the expected 55.2). "The effects of supply-chain restrictions were clear in the details, with input price indices climbing to series highs," ANZ Bank analysts explained. "Measures of backlogs and manufacturing timelines were likewise at their greatest levels on record."

Domestically, the preliminary composite PMI for October dipped to 54.3, down from 55.2 predicted. This was mainly due to a decline in the German service PMI activity, which fell by 3.6 points to 52.4. Meanwhile, the EA manufacturing PMI remained relatively constant, dropping 0.1 points to 58.6. "The numbers show that growth in Europe will moderate in Q4, but the recovery will remain intact," ANZ analysts noted. "The composite employment index increased by 1.2 points to 56.1, while the prospective output index increased by 0.3 points to 67.2."

EUR/USD Intraday Technical Levels

Support Resistance

1.1624 1.1659

1.1604 1.1675

1.1588 1.1694

Pivot Point: 1.1659

EUR/USD - Technical Outlook

According to the daily swing chart, the primary trend is down. However, momentum is increasing. A trade through 1.1755 will shift the primary trend to the upside. A break of 1.1524 will signify the resumption of the downturn.

The minor trend is positive. This is fueling the upward momentum. A transaction through 1.1669 indicates that purchasing is becoming more powerful. A break of 1.1572 will shift the minor trend to the downside.

Support is a sequence of 50% levels at 1.1640, 1.1621, and 1.1597 based on the close at 1.1644. Moreover, 1.1909 to 1.1524 is the major range. The retracement zone from 1.1717 to 1.1762 is the next potential upside objective and resistance zone. All the best!