Bears add pressure ahead of FOMC Minutes

EUR/USD Current Price: 1.0955

• The minutes of the US FOMC meeting stand out in the American afternoon.
• Sour feeling prevails amid geopolitical tensions, headlines the US.
• EUR/USD is extending its slide and could test the 1.0900 area in the near term.

EUR/USD continues to trade uneventfully below the 1.1000 level on Wednesday, confined to a tight range. The absence of a new catalyst and upcoming releases from the United States (US) are keeping investors cautious, while geopolitical tensions are also undermining sentiment.

Asian shares traded mixed, with Chinese shares notably lower, which came under selling pressure after the long week-long holiday. China’s recent data has raised concerns that the stimulus measures may not be enough to revive the battered economy. U.S. futures also fell on news that the U.S. Justice Department indicated it was considering a possible breakup of Google as an antitrust remedy for its search and advertising monopoly.

The US dollar (USD) made the most of this environment, pushing higher against most major rivals, although it failed to make a run.

Investors await the minutes of the meeting of the Federal Open Market Committee (FOMC), scheduled for the American afternoon. The paper is meant to provide insights into the policymakers’ reasoning behind the decision to cut the benchmark interest rate by 50 basis points (bps). It could also include hints about future actions, although financial markets are likely to take these with a grain of salt, given the latest macroeconomic numbers that indicate the labor market is much healthier than previously feared.

On the data front, Germany released its August Trade Balance, which posted a surplus of €22.5 billion, beating expectations of €18.4 billion. The US released MBA Mortgage Applications for the week ended October 4, down 5.1%. Beyond the FOMC minutes, the macroeconomic calendar for the US session includes several Federal Reserve (Fed) speakers spread across afternoon and August stocks.

EUR/USD short-term technical outlook

EUR/USD hit a fresh weekly low of 1.0950 during European trading hours and is trading close ahead of the US open. The daily chart shows that a broken daily uptrend line from June continues to provide resistance, currently around 1.1000. At the same time, the 20 Simple Moving Average (SMA) is gaining downward traction about 150 pips above the current level, while the 100 and 200 SMAs remain below the current level. Finally, technical indicators maintain their downward slope in negative levels, albeit with uneven strength.

In the short term, and according to the 4-hour chart, the risk is leaning to the downside. A bearish 20 SMA acts as intraday dynamic resistance, now at around 1.0970. Technical indicators, meanwhile, lack directional strength but remain in negative levels, consistent with another south leg. Finally, the 100 and 200 SMAs turned south well above the current level, reflecting persistent selling interest.

Support levels: 1.0920 1.0885 1.0840

Resistance levels: 1.0970 1.1000 1.1045