EUR/USD Analysis – September 02, 2021

Weaker Dollar Continues to Push EUR/USD Higher

After hitting a top of $1.1858 and a low of $1.1793, the EUR/USD currency pair was settled at $1.1837. Despite the current weakening in the U.S. dollar, the currency pair EUR/USD resumed its bullish streak for the fourth straight day. On Wednesday, the U.S. Dollar Index (DXY), which measures the dollar's value against a basket of six major currencies, declined for the fourth consecutive session, settling at 92.5. On Wednesday, U.S. Treasury yields on the benchmark 10-year note fell to 1.29 percent, adding to the dollar's weakness and pushing the EUR/USD currency pair higher on the board.

On Wednesday, U.S. Treasury yields on the benchmark 10-year note fell to 1.29 percent, adding to the dollar's weakness and pushing the EUR/USD currency pair higher on the board. The weakening of the U.S. dollar on Wednesday was fueled by the poor job creation by private firms in August.

Over the past several days, the dollar has been under pressure after Federal Reserve Chairman Jerome Powell struggled to provide a firm schedule for tapering and stated that the Fed would proceed with caution while raising interest rates. Investors were hoping for some signs from him about decreasing economic support, but no indication of when it may begin dashed their hopes, dragging on the U.S. dollar.

Furthermore, Bundesbank President Jens Weidmann warned on Wednesday that Eurozone inflation could exceed the ECB's forecasts since the transient variables that caused the recent rise could sink into underlying price growth. He warned that if temporary causes lead to increased inflation expectations and faster wage growth, inflation could rise considerably in the long run.

Weidmann's statements raised optimism that the ECB will be forced to stop its $2.19 trillion PEPP economic stimulus program. These forecasts boosted the single currency Euro's strength versus the U.S. dollar, pushing EUR/USD higher on the board.

On the data front, German Retail Sales in July fell to -5.1 percent, vs. a forecast of -0.9 percent, weighing on the Euro and capping any advances in EUR/USD at 11:00 GMT. The Spanish Manufacturing PMI rose to 59.5 in August, beating expectations of 58.9, boosting the Euro, and pushing the EUR/USD higher at 12:15 GMT.

At 12:45 GMT, the Italian Manufacturing PMI increased to 60.9 from 60.1 previously, pushing the Euro higher and adding to the EUR/USD gains. The French Final Manufacturing PMI remained unchanged at 57.5 at 12:50 GMT. The German Final Manufacturing PMI remained constant at 12:55 GMT from the projected 62.7 in August. The August Final Manufacturing PMI from the entire bloc came in at 61.5, as expected, at 13:00 GMT.

The Italian unemployment rate fell to 9.3 percent in July, compared to an estimate of 9.6 percent, which boosted the Euro and pushed the EUR/USD pair higher. At 14:00 GMT, the unemployment rate for the entire E.U. remained unchanged from July, at 7.6%.

At 17:15 GMT, the ADP Non-Farm Employment Change fell to 374K in August, vs. a forecast of 640K, weighing on the U.S. dollar, which led to further advances in the EUR/USD pair. The August Final Manufacturing PMI stayed unchanged at 18:45 GMT, with expectations of 61.1. For August, the ISM Manufacturing PMI rose to 59.9 from 58.5 expected at 19:00 GMT, bolstering the U.S. dollar and capping further advances in EUR/USD. Construction spending was constant at 0.3 percent, as forecast.

The ISM Manufacturing Prices decreased in August to 79.4 from 84.1 expected, weighing on the U.S. dollar and adding an upward trend to the EUR/USD pair. The macroeconomic statistics from Europe favored the single currency Euro, which continued to underpin the EUR/USD currency pair's upward trend.

Apart from the Euro's strength and the dollar's weakness, the EUR/USD pair's gains and upward momentum can also be linked to the current risk-on market mentality, fueled by growing immunization rates worldwide. Despite the spread of the Delta variety and discovering a new mutant form in South Africa, the market remained upbeat as fully vaccinated people were allowed to cross international borders. The market's risk sentiment strengthened as chances for a quick economic rebound grew, and riskier assets such as the EUR/USD remained popular.

EUR/USD Intraday Technical Levels

Support Resistance

1.1800 1.1865

1.1764 1.1894

1.1736 1.1930

Pivot Point: 1.1829

EUR/USD - Technical Outlook

The EUR/USD is trading with a bullish bias at the 1.1838 level and consolidating in between a tight trading range of 1.1857 – 1.1830 level. The breakout of the 1.1857 level exposes the pair towards the next resistance levels of 1.1866 and 1.1893 levels. Alternatively, a bearish breakout of the 1.1830 support level exposes the pair towards the 1.1802 and 1.1766 support zones. The 50 SMA (simple moving average) supports the buying trend, along with the Stochastic, which also suggests an upward trend in the EUR/USD.

Investors seemed to hesitate about entering the market ahead of the US NFP data that’s due on Friday. Let’s keep an eye on 1.1830 as bullish bias seems to dominate above this, and vice versa. All the best.