General analysis EURUSD for 07.10.2021
Current dynamics
This week the EURUSD pair continues to decline, renewing annual lows. On Thursday there is a correction of the downtrend, but the fundamental data points to a further decline of the pair.
Yesterday the Senate Minority Leader, Republican Mitch McConnell, offered Democrats an interim solution on the national debt that would fund the government operations until December. Even a temporary solution to the problem is a positive signal for the global economy, as the risk of default becomes minimal, and the Fed has no problem to start cutting QE in November. It is also worth noting that the U.S. Department of Energy is working on a step to reduce price pressure by releasing strategic oil reserves. Meanwhile, strong labor market data from ADP released yesterday provided support to the dollar ahead of Friday's U.S. jobs report.
At the same time, rising gas prices created stagflation risks in Eurozone. High inflation and slow GDP growth are limiting investors' interest in the EUR and suggesting that the normalization of the Fed's monetary policy, the withdrawal of stimulus, and strong demand for the USD are not the only drivers for the pair's decline.
Tomorrow at 14:30 (GMT+2) the number of U.S. workers collecting unemployment benefits will be released. Taking into account the interim ADP data, the number of people receiving benefits will decline. Friday's U.S. jobs report is this week's key release.
Support and resistance levels
There is a downtrend correction on the 4-hour chart. The instrument is trading at the bottom of the Bollinger Bands, testing the resistance at 1.1560. The indicator is directed downward and the price range has widened, indicating that the current trend continues. MACD histogram is in the negative zone, holding a sell signal. Stochastic is preparing to enter the overbought area, a strong sell signal is expected within 1-2 days.
- Support levels: 1.1485, 1.1515, 1.1530.
- Resistance levels: 1.1560, 1.1585, 1.1640, 1.1690, 1.1730, 1.1770.
Trading scenarios
- It is possible to open short positions at the current price with a target of 1.1500 and a stop-loss at the level of 1.1590. Implementation period: 1 day.
- Long positions should be opened above the level of 1.1605 with a target of 1.1690 and a stop-loss at the level of 1.1575. Implementation period: 1-2 days.