{x} | Trading.live

Summary: The EURUSD faced renewed downward pressure on Thursday, falling below 1.0850 during the New York session. Despite weak durable goods orders data, the U.S. dollar benefited from better-than-expected weekly initial jobless claims data, leaving the asset in a weakened state.

Fundamentals

Data released by the U.S. Department of Commerce on Thursday indicated that U.S. non-defense capital goods orders, excluding aircraft, grew by only 0.1% in July after a revised 0.4% decline in June. Overall orders for durable goods, items designed to last for at least three years, fell by 5.2% on a month-to-month basis, surpassing expectations. This decline reflects a reduction in commercial aircraft orders.

Over the past two months, some transportation orders have shown poor performance, leading to fluctuations in this report, which is a common occurrence. Core orders matched expectations for this month, but note that June's data was significantly revised downward. Overall, due to continued contraction in manufacturing, the data is relatively weak. Concerns arise that the automotive sector might start to stall in the coming months, and by 2024, due to persistently high interest rates, the auto industry might struggle to gain traction. Additionally, the United Auto Workers (UAW) union is expected to hold a strike in September, which could significantly impact economic data if the strike persists.

In general, business equipment orders in U.S. factories slightly increased in July compared to the downwardly revised data from the previous month, indicating some caution in capital investments by businesses amidst elevated borrowing costs and economic concerns.

Regarding the job market, initial jobless claims in the U.S. dropped to 230,000 individuals in the week ending August 19, below the expected 240,000, maintaining a declining pattern.

Despite the Fed's substantial rate hikes throughout the year, the job market remains tight. Employers are now inclined to ramp up hiring after struggling to onboard staff during the pandemic. The robust performance of the U.S. labor market and the retreat in inflation are stoking optimism that the U.S. economy might avoid a recession. However, continuing claims for unemployment stand at 1.702 million, which remains historically low, indicating that some displaced workers are experiencing short-term unemployment.

Technical Analysis

The EURUSD has experienced a decline of approximately one month, a trend shared by other major USD-denominated currencies. This trend is driven by the strong performance of the U.S. dollar, buoyed by expectations of higher U.S. interest rates for an extended period.

At its current level, the asset prompts consideration of whether investors view this as the end of a corrective pattern or the beginning of a broader reversal. While this viewpoint largely hinges on subjective analysis, one perspective suggests that the asset is in a bullish zone when trading above its 200-day SMA and in a bearish zone when trading below it.

Presently, the asset is testing the 200-day SMA from above, which coincides with the lows observed at the end of June and the beginning of July. A breach below this point could signal a bearish move, with the next support in the vicinity of 1.0700 - 1.0650, aligning with the bottom of the 200/233-day SMA range, also serving as support from May. In terms of trading strategy, it is recommended to buy low and sell high.

Trading Recommendations

Trading Direction: Short

Entry Price: 1.0860

Target Price: 1.0760

Stop Loss: 1.0962

Valid Until: 2023-09-07 23:55:00

Support: 1.0814, 1.0801, 1.0760

Resistance: 1.0878, 1.0909, 1.0935