EUR/USD Rebounding But Not for Long

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eurusd midday pic oct 23

The Euro surged in trade today, reversing a strong downwards trend that has engulfed the currency over the past few days, primarily because the Eurozone PMI came in at 50.7. This was a 0.4% increase from a previous September reading of 50.3, while the services PMI was 52.4, slightly above the consensus estimate of 52.0.

Manufacturing activity in Germany, the Eurozone’s biggest economy rose to 51.8 as opposed to the expected 49.5 reading. Traders should now closely watch the European Central Bank, as many experts assume that it is planning to start buying corporate bonds as early as December.

Due to this, many analysts believe that this sudden reversal may soon come to a halt, as they are still trying to comprehend the next steps that will be taken by the European Central Bank. Furthermore, if unemployment claims are less than expected in the U.S. (13:30 GMT), we could easily see a sudden setback.

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When looking at the hourly chart for the EUR/USD, the currency pair has taken support around $1.26355 with the next level of resistance emerging near $1.26748. The currency pair however, continues to trade below the 100 day moving average, as the chart indicates.

Interestingly, the momentum indicator for the EUR/USD is showing its first signs of a reversal from its current downtrend, which experts feel is a positive sign for the short term. Additionally, the relative strength index has given a clear buy signal, which is indicative of a shift of momentum towards the buy side.

Actionable Insight:

Short the EUR/USD if it moves below $1.26355 for a short-term target at $1.25454, with a strict stop loss above $1.26664

Long the EUR/USD only if it moves above $1.26664 for an intermediate target at $1.27131, with a strict stop loss below $1.26263

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Deepak Tiwari, a law graduate, has been working as a journalist for six years now. He currently writes on Bitcoin, economic, and Forex related news at ForexMinute, the brand new financial news portal which is making waves among Forex traders around the globe for the innumerable Forex resources it offers for readers, traders and brokers. His other specialties include writing on law & governance, finance, internet marketing, careers, politics, international relations & diplomacy, etc.