Corrective advance, limited upside potential

EUR/USD Current Price: 1.1067

• The United States and Canada celebrate Labor Day, local markets remain closed.
• Eurozone manufacturing PMIs were revised upwards in August.
• EUR/USD is recovering ground, but growth looks limited in the short term.

EUR/USD recovered some ground on Monday, hovering in the 1.1060 price zone ahead of the US session, which will be uneventful anyway given a holiday in the United States (US). Both the US and Canada are celebrating Labor Day, granting limited activity at the financial board level until the next opening in Asia.

Indices came from equities, with weak performance in Asian and European indexes weighing on investor sentiment. The US dollar is broadly weak, while the euro found modest demand on revised PMI revisions from Hamburg Commercial Bank (HCOB). According to the final report, EU manufacturing output was printed at 45.8 in August, slightly better than the 45.6 previously estimated. For Germany, the figure came in at 42.4, improving from the flash estimate of 42.1.

Given the holiday in the US, the macroeconomic calendar will remain empty for the next few hours. However, the country will release more employment-related data during the week ahead of the non-farm payrolls (NFP) report scheduled for Friday.

EUR/USD short-term technical outlook

Technically speaking, the ongoing advance looks corrective. EUR/USD fell to 1.1041, a fresh two-week low before rebounding and remains below Friday’s high of 1.1094. On the daily chart, buyers have emerged around a simple moving average (SMA) of 20, while the 100 and 200 SMAs remain well below the current level. At the same time, the Momentum indicator is heading firmly south, approaching its upper 100 line, while the Relative Strength Index (RSI) has flattened around 55. Overall, the risk of a bearish extension looks quite of limited.

In the short term, and according to the 4-hour chart, however, the upside appears limited. EUR/USD is hovering around a slightly bullish 100 SMA, while a strongly bearish 20 SMA provides dynamic resistance around 1.1090. At the same time, technical indicators are consolidating in negative levels, suggesting the absence of buying interest.

Support levels: 1.1020 1.0985 1.0940

Resistance levels: 1.1090 1.1145 1.1190