EUR/USD: Downtrend Breakout Remains Unconfirmed

Today, 4 September, the market’s main focus is the August US employment report. According to CNBC, the consensus forecast calls for just 53,000 nonfarm jobs to be added following July’s decline, highlighting the continued weakness of the labour market. At the same time, the Federal Reserve’s focus is shifting towards inflation risks. In the eurozone, a Reuters poll showed that all 65 economists surveyed expect the ECB to raise its deposit rate by 25 basis points to 2.50% at its 10 September meeting, while around 91% expect the rate to remain at that level through the end of the year.

Technical Analysis of EUR/USD

On 21 August, a peak formed around 1.1700 on the four-hour chart, from which a trend and a descending trendline developed. The price repeatedly rejected this trendline to the downside, eventually reaching a low of 1.1570 on 2 September. The following day, the trendline was broken to the upside on increased volume, and the price is now attempting to establish itself above it, as well as above the upper boundary of the current market profile at 1.1610.

A red resistance area is located around 1.1660 above the established market density. In the event of a false breakout followed by a further decline, the asset could trade within the market density or continue lower. However, for this to happen, the price would need not only to test the upper boundary but also break through the Point of Control (POC) at 1.1600 and the lower boundary of the profile at 1.1580. Just below the lower boundary of the profile, there is also a green support area around 1.1570.

The RSI+MAs indicator reads 58, with both moving averages sitting near their lower boundaries. Although the oscillator has moved above the neutral zone, the indicators have yet to confirm the breakout.

Key Takeaways

The divergence between the RSI and its moving averages leaves the sustainability of the recovery uncertain, indicating that the market may require additional time for remaining breakout conditions to solidify. The August U.S. employment report could offer further catalysis for the currency pair in the coming hours, particularly as the Fed’s September decision gains prominence amid expectations of an ECB rate hike.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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