Saad Ullah
EUR/USD remains under pressure, holding below the 1.1000 resistance level as the US Dollar gains strength on robust employment data.
EUR/USD Faces Key Resistance at 1.1000
The EUR/USD pair experienced continued selling pressure last week, losing over 1.5% as it traded below the critical 1.1000 resistance. On Monday, the pair stayed steady in a narrow channel, reflecting uncertainty in the European session.
The US Dollar (USD) gained significant strength on Friday, buoyed by stronger-than-expected employment data. The Nonfarm Payrolls report showed an increase of 254,000 jobs in September, significantly surpassing the forecast of 140,000. Additionally, the unemployment rate fell to 4.1%, with the Labor Force Participation rate remaining unchanged at 62.7%. These numbers led to a notable rally in the USD Index, marking its largest weekly gain this year.
US Data Bolsters USD, Impacting EUR/USD
The upbeat employment figures have fueled speculation about the Federal Reserve's (Fed) upcoming rate decision. Investors now widely expect a 25 basis point (bps) rate cut in November. Although the market dismisses the possibility of a 50 bps cut, any hint from Fed officials about future rate policies could affect the USD’s momentum. According to the CME FedWatch Tool, the chances of a larger rate cut remain slim.
Without any significant macroeconomic data releases from the US on Monday, traders will focus on speeches by Fed policymakers. These comments could provide additional insight into the Fed's stance, influencing EUR/USD movements.
EUR/USD Technical Analysis: Eyes on 1.1000
From a technical perspective, the EUR/USD shows signs of oversold conditions. The Relative Strength Index (RSI) on the 4-hour chart hovers below 30, suggesting the potential for a technical correction. However, 1.1000 continues to act as a formidable resistance level. Should EUR/USD break above this point, the next key resistance levels would be at 1.1040 (Fibonacci 38.2% retracement) and 1.1100 (Fibonacci 23.6% retracement).
On the downside, support levels are seen at 1.0950 (Fibonacci 61.8% retracement), followed by 1.0900 and 1.0870 (Fibonacci 78.6% retracement).
EUR/USD Outlook: Limited Upside Potential
Despite the possibility of a technical rebound, EUR/USD's upward momentum appears limited. US stock index futures have already dropped by 0.3% in the European session, signaling a risk-off sentiment. If market conditions remain negative during the American trading session, EUR/USD recovery attempts may falter, keeping the pair below key resistance levels.
The EUR/USD continues to navigate a challenging trading environment, with USD strength dominating the landscape. While a technical correction is possible, sellers are likely to retain control unless a significant shift in market sentiment occurs.
Saad Ullah
