EUR/USD shifts to the downside and dips below 1.0850 after an earlier surge toward 1.0900. The US dollar regains momentum after an uninspiring August jobs report, exerting pressure on the pair.
Technical Overview of the Market
The 4-hour chart’s Relative Strength Index (RSI) indicator adopted a neutral stance, hovering around the 50 mark as Friday unfolded. This suggests a momentary pause in selling pressure, with sellers taking a step back for the time being.
In terms of potential price movements, EUR/USD encounters a formidable resistance zone within the $1.0890–$1.0900 range. This area is significant as it coincides with the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 23.6% Fibonacci retracement level from the latest downtrend. A decisive 4-hour close above this barrier may pique the interest of technical buyers, potentially paving the way for an extended upward move toward 1.0930 (a static level) and 1.0960 (comprising the Fibonacci 38.2% retracement and the 200-period SMA).
On the flip side, if the EUR/USD pair drifts lower, initial support can be found around the 1.0840 level, marked by the 50-period SMA. Beyond that, psychological support at 1.0800 may come into play, followed by the 1.0770 level, which signifies the endpoint of the recent downtrend and could serve as a crucial support level in the event of a deeper pullback.
Fundamental Overview of the Market
EUR/USD managed to establish a support level and find stability near 1.0850 early on Friday, following a significant decline observed on Thursday. If the pair succeeds in reclaiming the 1.0900 level later in the day, it may have room to extend its upward trajectory heading into the weekend.
The preceding day saw investors adopt a cautious approach by refraining from factoring in the possibility of another interest rate hike by the European Central Bank (ECB) in September, which contributed to a waning interest in the Euro. Additionally, during the same day, data from the United States indicated that the Personal Consumption Expenditures (PCE) Price Index largely aligned with market expectations, and weekly initial jobless claims registered a decline from 232,000 to 238,000.
Despite these data releases, the likelihood of the Federal Reserve (Fed) keeping its policy rate unchanged remained relatively stable at approximately 50%. Surprisingly, the US dollar showed signs of resurgence, exerting pressure on the EUR/USD pair. It’s worth noting that this recovery in the USD could be partly attributed to profit-taking as August drew to a close on Thursday, especially considering the lack of substantial movement in US T-bond yields.
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