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EU Inflation and PMI figures Failed to Impress EURUSD Traders


EURUSD gave up 0.03% and declined to 1.0894 after EU inflation data failed to impress investors. Earlier today, the EURUSD pair made a fresh two-year low at 1.0878, the fourth day of straight declines, as the ECB has remained on the dovish side.

Dismal macro figures from the Euro area also weigh on the common currency while the U.S. economy is relatively strong and the Fed’s approach is less dovish than the ECB’s. The ECB, in its last policy meeting, cut the Deposit Rates by ten bp to -0.50% and unveiled another round of debt purchases.

Annual Euro Area inflation came in at 0.9%, and below expectations of 1% in September, and below the previous reading of 1%. Annual core inflation rose by 1%, and in line with expectations. The latest inflation readings do not add anything new to the EURUSD outlook.

Earlier today the Eurozone Manufacturing PMI came in at 45.7 beating forecasts of 45.6 in September but below the August reading of 47 in September. The September reading is the lowest since October 2012, showing the fragile state of the Euro area.

Germany Markit Manufacturing PMI came in at 41.7 topping forecasts of 41.4 in September; the August reading was at 43.5. The September manufacturing PMI’s reading is the lowest since June 2009.

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EURUSD Important Levels to Watch

On the technical side, EURUSD was rejected at 1.09 as the bearish momentum is intact with the pair trading below all major moving averages. The common currency has been trapped in a descending channel since June, and now the pressure from disappointing macro data continues to pressure the pair to fresh two year lows. On the downside, the next important support level comes in at 1.0878, the daily and 2-year low, and a break to this level will encourage more bears to join the action and drive the price action down to 1.0838 the low from May 2017. Below this level, the next support comes in at the lows seen on April 2017 at 1.0569. This is the next target that could be attained on a convincing downside break of the 1.0838 critical support line.

On the flipside, immediate resistance stands at today’s high of 1.09, and a break above this level can trigger a test Friday’s high of 1.0958, while the next resistance can be found at the upper bound of the descending channel, at 1.1040.

Bearish traders will probably remain comfortably short as long as the pair trades below the psychological 1.09 mark.

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