Another disappointment, another fall
Dollar’s fall resumes again after another piece of disappointing US data. ISM manufacturing index dropped from 52.9 to 51.2 in Oct, lowest reading since Jun 03.
Even though above 50 still indicates expansion, the pace is continuing to slow to near flat. Also, price index fell to 47, below 50 (deflationary) for the first time in 14 moths. Housing data is also disappointing today, with Sep pending home sales dropping more than expected by 1.1% and construction spending dropped by 0.3%. ADP employment report did give an upside surprise by rising to 128k in Oct but reaction is, again, muted.
Technically speaking, divergence condition is still there
which suggests downside momentum of dollar is still diminishing. While one might hold on with short dollar position on hand, it’s not advisable to jump in at this moment.
EUR/USD
Daily Pivots: (S1) 1.2700; (P) 1.2740; (R1) 1.2804;
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EUR/USD’s retreat from 1.2782 was contained above mentioned 55 hours EMA and rally resumes in US session, reaching as high as 1.2797 so far. Outlook remains the same. Bearish divergence condition is still being displayed in hourly MACD and RSI suggesting that a short term top could be around the corner, if not formed yet. However, a drop below 1.2742 is needed to confirm a short term top is formed. Otherwise, EUR/USD could still extend rally before turning into consolidation.
On the downside, below 1.2742 will bring further pull back towards 1.2742 support. But we’d expect downside to be contained above 61.8% retracement of 1.2523 to 1.2979 at 1.2628 and bring rally resumption. On the upside, next target will be 1.2829 resistance first and then 1.2978 resistance (this year’s high).
In the bigger picture, firm break above 1.2765 cluster resistance confirms completion of whole fall from 1.2937, which has likely marked the completion of whole consolidation from 1.2978 too, as supported by daily RSI’s break of its own falling trend line. Next upside target will be 1.2978 high. firm break above 1.2978 and psychological resistance of 1.3000 will indicate medium term rally from 1.1639 has resumed and bring further rise to next upside target of 78.6% retracement of 1.3668 (04 high) to 1.1639 (05 low) at 1.3234.
However, strong bounce off from 1.2978/00 level will indicate the consolidation from 1.2978 will extend further sideway. Meanwhile, on the downside,
a break below 61.8% retracement of 1.2523 to 1.2979 at 1.2628 will be the first warning that whole rise from 1.2483 has completed.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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