EUR/USD Analysis – September 27, 2021

Euro Breaks Below 1.1722 Pivot Point

EUR/USD closed at $1.1714 after setting a high of $1.1748 and a low of $1.1700. EUR/USD fell for the 6th session in the previous seven days on Friday and continued its decline amid the rising prices of the U.S. dollar. The fresh buying in the U.S. dollar was a key factor in the reversal of the EUR/USD currency pair's movement. The recent optimism came under pressure after uncertainty increased about potential risks from the debt crisis at China Evergrande Group, along with the prospects for an early rate hike by the Fed. It dampened the appetite of investors for riskier assets and helped revive the demand for safe-haven greenbacks.

The rising strength of the U.S. dollar then dragged the currency pair EUR/USD to the downside on Friday. The U.S. Dollar Index reached 93.4 on Friday, while the U.S. Treasury Yield on the benchmark 10-year note rose to 1.46%, putting additional pressure on the riskier asset, EUR/USD.

On the data front, at 13:00 GMT, the German IFO Business Climate in September remained flat with the expectations of 98.8. At 17:56 GMT, the Belgian NBB Business Climate dropped in September to 4.0 against the expected 6.7 and weighed on the single currency euro. That added a further loss in the EUR/USD currency pair. On the U.S. side, at 19:00 GMT, new home sales in August increased to 740K versus the expected 712K, supporting the U.S. dollar and adding to the EUR/USD pair's losses.

Meanwhile, on Wednesday, the Federal Reserve indicated that it will likely start rolling back the massive pandemic-related stimulus toward the end of this year and will complete the process by mid-2022. The Fed also revealed its plans to raise interest rates in 2022, which raised Treasury bond yields to their highest levels. The U.S. Treasury yield on a 10-year note moved above the 1.40% threshold for the first time since June and further underpinned the U.S. dollar, which added pressure on the EUR/USD currency pair.

Furthermore, the preliminary results of the German election showed that the Social Democratic Party (SPD) had won the most seats in the federal election of Germany. The formal official results will be announced weeks later. There was a very narrow margin between the Social Democratic Party and the Christian Democratic Union (CDU). A large number of postal ballots remain to be counted, and it is expected that whichever party comes first, there will be lengthy coalition negotiations before a government can be formed.

EUR/USD Intraday Technical Levels

Support Resistance

1.1716 1.1728

1.1710 1.1734

1.1704 1.1740

Pivot Point: 1.1722

EUR/USD - Technical Outlook

The EUR/USD is trading at the 1.1704 level, having slipped below the 1.1722 pivot point. On the 4-hour timeframe, the EUR/USD has closed a bearish engulfing candle that suggests a bearish trend in the EUR/USD pair. Further on the lower side, the EUR/USD’s immediate support stays at 1.17004 level and a break below this exposes the pair towards 1.1685 level.

On the resistance side, the breakout of 1.1722 resistance exposes the EUR/USD towards 1.1743 and even towards the 1.1768 mark. Taking a look at the leading technical tools like RSI and Stochastic, these are held in a sell zone, suggesting a bearish bias in the EUR/USD currency pair. At the moment, the major currency is closing strong sell candles in a range of 1.1722–1.17004. Thus, a breakout of this narrow range will determine further trends in the EUR/USD pair. All the best!