EURUSD is falling with strong incoming U.S. data. In the last two jobs reports, unemployment fell by 0.1% in each, showing there is no need to panic about a hard landing scenario where the Fed would need to cut rates aggressively. The FOMC minutes and speeches from some members also indicate that the Fed will continue to cut rates but is not in a hurry to do so.
On the other hand, the Eurozone is in much worse shape than the U.S. at the moment. Budget problems are impacting the bond markets of several countries, including France, where the budget deficit target will likely not be reached for at least two years. Germany is affected by a slowing manufacturing sector, especially the auto sector, where traditional car firms are struggling against EVs. The Eurozone composite PMI fell below 50 for the first time in seven months, indicating that economic activity is slowing.
(EURUSD Monthly Chart)
EURUSD’s latest surge to 1.12 was a bit overextended, as signals of a weak euro were present, but the move can be seen more as a technical push. The 16-year-long trendline at 1.1247 is a massive resistance level, tested for two months in a row, and has demonstrated its strength by triggering sharp selloffs both times.
(EURUSD Daily Chart)
After completing a double top pattern, one top in August and one top in September, EURUSD quickly fell at the start of October, breaking the neckline of the formation at 1.10. With the combined strength of the double top, the 16-year-long trendline, and unfavorable fundamentals, EURUSD has the potential to decline further in the coming weeks.
The most likely target for EURUSD could be 1.08. This level aligns with both the double top formation’s target and the 76.4% retracement level. Additionally, the trendline from the October low of last year will be just below 1.08, factoring in the potential passing of time for EURUSD to reach that point. The triple support at 1.08 makes it a likely target and a potential upward reaction point in the medium term.
Any upward reaction that fails to recover 1.1050 could still present selling opportunities for now. A change in momentum and/or fundamentals will be needed for EURUSD bulls to regain market dominance.
