EUR/USD Looks Vulnerable As Downside Risk Accelerates

Majors traded within its recent ranges, with the traded volumes still at their lowest in over two months. Attention has turned now to the upcoming ECB meeting next Thursday, and seems little can be expected ahead of it from currency pairs.

Data released this Tuesday failed to trigger interesting moves, although things continue worsen in Europe, given that German producer prices index fell by 2.1% in September, compared to a year before, much worse than the previous -1.7%.

The EU Current Account surplus for August, hardly a market mover, shrunk to €17.7B, while July data was revised higher, from €22.6B to €25.6B. In the US, housing starts rose by 6.5% in September to an annual rate of 1.21M, following two months of declines, and approaching the 8-year high reached past June.

The EUR/USD pair retreated from a daily high set at 1.1386 in the European session, ending the day around the 1.1340 level, where it closed last week. From a technical point of view, the pair continues lacking directional strength, although the risk is turning towards the downside in the short term, as the 1 hour chart shows that the early rally was capped by the 100 SMA, while the technical indicators have retreated from near overbought levels and stand now around their mid-lines.

In the 4 hours chart, a brief advance beyond the 20 SMA was quickly reversed, and the indicator maintains a bearish slope, whilst the Momentum indicator has retreated from its mid-line and the RSI hovers around 46, limiting chances of a stronger rally for this Wednesday.

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