Market News & Analysis

Top Story

Strong US Data Drives EUR/USD to Test 4-Month Low at 1.10

Many traders are still on edge about the spread of coronavirus, but today’s stellar US data has alleviated at least some of those concerns.

In the strongest print in nearly a half decade, the ADP Employment report showed that the US economy added 291k jobs last month. For an indicator that appeared to be settling near “full employment” levels between 100k and 200k jobs per month, the back-to-back 200k+ prints suggests that the labor market remains robust.

Separately, the ISM Services PMI survey came in above expectations at 55.5, boosted by improvements in business activity, new orders and imports. That said, the slight deterioration in the employment component of the report took some of the shine of the strong ADP print (tune in tomorrow for our preview of what these reports mean for Friday’s marquee Non-Farm Payrolls release).

Not surprisingly, the perception that the US economy is chugging along despite coronavirus disruptions overseas has boosted the greenback, the day’s strongest major currency along with the Australian dollar. Looking at the world’s most widely-traded currency pair, EUR/USD has fallen to test a critical support level near 1.10. This level (technically 1.0992) marks the pair’s lowest closing price over the last four months and has served as support on four distinct occasions over that period:

Source: TradingView, GAIN Capital.

For those tracking at home, we’re still monitoring EUR/USD’s turn-of-the-year head-and-shoulders top pattern at the top of its bearish channel. The pattern projects a “measured move” projection down near 1.0930, hinting at further downside potential if 1.1000 support is breached. Below that level, bears may look to target the lowest close in nearly three years around 1.0900. Even if we see another bounce off these levels, traders may opt to sell the rally in-line with the longer-term downtrend as long as rates remain below Monday’s peak near 1.1100.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.