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EURUSD: sellers on track to reach the 135th degree

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On Monday the 2nd of October, trading on the euro/dollar pair closed down. The euro fell to 1.1730 against the dollar on the fallout from Catalonia’s independence referendum and a general strengthening of the dollar.

A strong ISM manufacturing report as well as increased expectations of a rate hike at the Fed’s December meeting provided support for the dollar. The dollar continued to strengthen in Asia.

US data:

  • ISM manufacturing index: 60.8 (forecast: 57.8, previous: 58.8).
  • Construction spending (Aug): 0.5% (forecast: 0.2%, previous: -1.2%).

Day’s news (GMT 3):

  • 06:30 Australia: RBA interest rate decision.
  • 11:30 UK: PMI construction (Sep).
  • 12:00 Eurozone: PPI (Aug).

EURUSD rate on the hourly. Source: TradingView

On the hourly timeframe, bearish sentiment still prevails. It won’t be easy for euro bulls to reverse the price here given rising political tensions resulting from the Catalonia independence referendum, ambiguous statements from ECB representatives with regards to QE reversal, and increased expectations of a rate hike from the Fed in December.

In Asia, the rate has dropped to 1.1699. Sellers have completely erased the gains seen between the 27th and 29th of September. Seeing as the hourly indicators are in the buy zone for the euro, I’m expecting a rebound from the 112th degree. It’s not clear whether the price will bounce here because there’s a lot of downwards pressure on the euro and the trend line on the daily timeframe was broken through on the 26th of September. For now, sellers are keeping on track towards the 1.1650 support. If buyers fail to defend this level, we can start looking towards 1.1330. For Tuesday, my target is 1.1670 at the 135th degree. If the hourly candlestick closes above 1.1735, my scenario for a decline will not play out.


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