EUR/USD Forecast: Decline not over yet

EUR/USD Current Price: 1.1657

• Fed’s chief Powell urged Congress for fiscal support in his second day of testimony.
• Markit preliminary September PMIs showed slowing business activity mainly in the services sector.
• EUR/USD is trading near a fresh two-month low and poised to extend the slump.

The EUR/USD pair fell to 1.1650, a fresh two-month low as speculative interest kept adding dollar’s longs. Data released this Wednesday was mixed but showed that economic growth remains sluggish. The preliminary estimates of the Markit PMIs showed that services output n the Union fell into contraction territory, with the EU index printing at   47.6 from 50.5 in August. Manufacturing activity was mixed across the Union,  although the index improved from 51.7 to 53.7. In the US, on the other hand, business activity remained in expansion territory, although services growth was softer than anticipated.

Further fueling dollar’s demand, Wall Street was unable to hold on to pre-opening gains and turned red. Federal Reserve Chair’s Jerome Powell testified again before Congress, and alongside Treasury Secretary Steven Mnuchin said that they are studying ways to provide additional support to small businesses without entering into details. As he did on Tuesday, Powell urged for fiscal support.

This Thursday, Germany will publish the IFO Business Climate, foreseen at 93.8 from 92.6 previously. The US will release Initial Jobless Claims for the week ended September 18, while Powell and Mnuchin will testify before the Senate Banking Committee.

EUR/USD short-term technical outlook

The EUR/USD pair ends Wednesday trading below the 1.1700 level, maintaining its bearish bias despite being oversold. The 4-hour chart shows that the Momentum indicator has bounced from oversold readings, but also that it holds well into negative levels. The RSI indicator, in the meantime, consolidates near oversold readings, as the pair develops well below all of its moving averages, with the 20 SMA maintaining a sharp bearish slope below the larger ones. Further declines are to be expected on a break below 1.1660, the immediate support level.

Support levels: 1.1620 1.1580 1.1530

Resistance levels: 1.1685 1.1725 1.1760  

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