As you meet the new week, spend it. Weak statistics on business activity in the eurozone has become the guiding star of the EUR/USD bears. Germany's purchasing managers index fell to its lowest level in more than 10 years. Clearly, the currency bloc remains weak and the ECB hawks' to assure that this is not the case seem unfounded. At the same time, the Fed does not doubt the strength of US GDP, and divergence in economic growth is an important driver of exchange rate formation on Forex.
The euro did not help either the verdict of the British Supreme Court on the illegality of the actions of the dismissed parliament of Boris Johnson, nor the growth of political risks in the States. The Prime Minister clearly abused the power but did not resign because of this, so the uncertainty over the pound and other European currencies has not disappeared. As for rumors about Donald Trump's impeachment, they did not, as one might expect, cost an egg. Trade wars have returned to the center of investor attention. If Germany, with a substantial share of exports in GDP, is one of the countries most affected by the trade conflict between Washington and Beijing, the United States feels very confident.
It would seem that the Fed has no reason to reduce the rate because unemployment is half a century old while inflation is accelerating, and GDP is pleasing to the eye. Nevertheless, the Central Bank refers to international risks, particularly the problems of the production sector. He responds sensibly to trade wars, as well as in the yield of US Treasury bonds.
Dynamics of yield on US bonds and PMI in the manufacturing sector
The Federal Reserve is looking at US debt market rates and stock indices, and Donald Trump, who wants to get a monetary stimulus, can only pull the strings so that investors put in the stock quotes expectations of a weakening monetary policy. This can be done with the help of criticism of Jerome Powell, which the President of the United States and is engaged in.
Nevertheless, neither the White House's desire nor the Fed's willingness to cut interest rates help the EUR/USD bulls. Yes, the dollar is vulnerable, but the euro looks frankly weak. The economy is crumbling and Mario Draghi discusses helicopter money. Will the ECB buy bonds in the primary market? However, this question will arise before Christine Lagarde.
The central event of the week by October 4 is the release of data on the American labor market. Strong employment outside the agricultural sector will reduce the likelihood of the third act of monetary expansion by the Fed in 2019 and strengthen the dollar. On the contrary, the weakness of non-farm payrolls will allow the euro bulls to gain a foothold in the range of $1.093-1.1095.
Technically, if the bears were able to keep the EUR / USD quotes below the support of 1.093, we could talk about activating the AB = CD pattern with a target of 161.8%. It corresponds to the mark of 1.08. So far, the first assault has been repelled and the situation is like a false breakdown. Further developments in the pair will depend on the ability of sellers to repeat the test and on how successful it is.
EUR / USD daily chart
