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EUR/USD Extends Overnight Losing Streak - Quick Trade Setup! 


During the Wednesday Asian trading hours, the EUR/USD currency pair failed to stop its overnight losing streak and drew further offers below the 1.1900 level, mainly after the negative Eurozone inflation was released on Tuesday. However, the negative Eurozone inflation undermined the sentiment around the shared currency and dragged the EUR/USD currency pair down.

On the other hand, the broad-based U.S. dollar strength, backed by the U.S. better-than-expected manufacturing data, also kept the currency pair under pressure. Meanwhile, the ECB is considering to depreciate the EUR, which has recovered 6% this quarter alone. However, these fears could also be regarded as the key factor that kept the currency pair bulls defensive. At the moment, the EUR/USD currency pair is currently trading at 1.1900 and consolidating in the range between the 1.1891 - 1.1930. Moving on, the currency pair traders may start to pricing additional ECB stimulus in the wake of sub-zero Eurozone inflation.

Despite the multiple stimulus packages delivered by the European Central Bank from EUR 4,500 billion to EUR 6,424 billion in the past months to support the economic damage from the coronavirus outbreak, the inflation turned negative in August. Details suggested, "The Eurozone inflation dropped into the negative area in August, with the consumer price index dropping 0.2% year-on-year against July's 0.4% increase.

Most of the economists were expecting softening inflation. However, markets weren't ready for the sub-zero print. This, in turn, exerted a major negative impact on the EUR currency, which dragged the EUR/USD currency pair below 1.1900 marks.

Apart from this, the reason for the currency pair bearish bias could also be associated with the reports that ECB will likely try to undermine the shared currency, which has recovered 6% this quarter alone. However, the ECB chief economist Philip Lane announced yesterday evening in an online conference. Across the pond, the market trading sentiment has been flashing green since the Asian session started on the day; however, the positive sentiment around the equities was boosted by the U.S. better-than-expected manufacturing data, which fueled the hopes of economic recovery.

At the data front, the August's ISM Manufacturing Purchasing Managers Index (PMI) increased to 56, against July's reading of 54.2 and the 54.5 forecasts. A surge in new orders recorded the index climb to its multi-year high. However, the upbeat data came right after upbeat China and Japan's manufacturing data, which also fueled hopes for economic recovery and gave support to market trading sentiment.

This, in turn, the broad-based U.S. dollar started to flashing green on the day. However, the U.S. dollar gains were unaffected by the upbeat market sentiment and held its gaining streak, at least for now. Thus, the U.S. dollar's modest gains could be considered the major factor that kept the currency pair lower. Whereas, the U.S. Dollar Index that measures the greenback against a bucket of 6-major currencies rose by 0.03% to 92.362 by 12:33 AM ET (5:33 AM GMT). Moving on, the U.S. dollar may put further bids only if the U.S. will succeed in releasing more relief measures.

Daily Support and Resistance

S1 1.1723

S2 1.1833

S3 1.1875

Pivot Point 1.1943

R1 1.1985

R2 1.2053

R3 1.2163

The EUR/USD pair slipped to trade at 1.1901 mark, having immediate support at 1.1891, a double bottom pattern prolongs that. Violation of 1.1891 level may stretch selling unto 1.1845 support. On the upper side, the resistance lingers at 1.1935 and 1.1978 level for EUR/USD. While the breakout of the support level of 1.1891 may extend sharp selling until the 1.1842 level. Let' consider selling below 1.1890. Good luck!

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