• Month-end flows weigh on shared currency on Friday.
  • US Dollar Index climbs to highest level since May 2017.
  • Inflation in US stays below Fed's 2% target rate.

The EUR/USD pair came under strong selling pressure toward the London fix and dropped below the 1.10 handle, likely triggering additional short positions and keeping the bearish outlook intact. As of writing, the pair was trading at its lowest level since May 2017 at 1.0968, losing 0.8% on a daily basis.

Shared currency ends August on a dismal note

Earlier today, the data published by Eurostat showed that the core Consumer Price Index in the eurozone stayed unchanged at 0.9% in August and fell short of the market expectation of 1% to weigh on the shared currency. Moreover, European Central Bank's (ECB) rate-setting committee member Olli Rehn said that the current situation in the euro area called for an effective policy package in September.

Later in the day, the US Bureau of Economic Analysis, which yesterday reported that the economy expanded by 2% in the second quarter as expected, announced that the core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred gauge of inflation, stayed unchanged at 1.6% on a yearly basis to match analysts' estimates.

Although the University of Michigan's Consumer Sentiment Index edged lower to 89.8 in its final reading for August from 92.1 in the previous estimate, the Greenback didn't have a tough time preserving its strength. As of writing, the US Dollar Index (DXY) is at its highest level in more than two years above near the 99 mark,

There won't be any macroeconomic data releases from the US on Monday due to Labor Day holiday. On the other hand, the IHS Markit will publish the final Manufacturing PMI for Italy, France, Germany, and the eurozone.

Technical outlook by FXStreet Chief Analyst Valeria Bednarik

The EUR/USD pair is heading into the weekly close at fresh multi-year lows, at a level previously seen on May 2017. The weekly chart shows that the decline is set to continue, as technical indicators continue heading south within negative levels, while the pair is developing below all of its moving averages. The 20 SMA has been acting as a dynamic resistance since mid-July at around 1.1200, offering a modest downward slope below the larger ones, also skewing the risk to the downside.

In the daily chart, technical indicators head firmly lower within negative levels, approaching oversold readings but still with room to extend their declines, as the price develops below bearish moving averages, after a failed attempt to advance above the 20 DMA at the beginning of the week.

With the pair unable to regain the 1.1000 figure, there’s a good chance that the pressure will persist next week. A break below 10.960/80, would expose the 1.0820 region, where it has the next relevant mid-term support. At this point, resistances are located at 1.1050, followed by the 1.1100 figure. A recovery above this last could see the pair extending its advance up to 1.1160 in corrective mode.

  • DXY (US Dollar Index) is at a stone’s throw from the 2019 high as the Greenback is having a substantial boost.
  • The next key resistances are seen at 98.94, the 2019 high, and potentially the 99.27 level.

DXY daily chart

DXY (US Dollar Index) is trading in a bull trend above the main daily simple moving averages (DSMAs). The market is nearing the 2019 high at 98.94.

DXY 4-hour chart

DXY broke above 98.68 resistance opening the gates for a potential continuation up towards 98.94, the 2019 high and 99.27, crucial previous level. If the market holds above the 98.68 level, it would be seen as a bullish sign.

DXY 30-minute chart

The Greenback is trading above the main SMAs, suggesting bullish momentum in the short term. Immediate support is seen at the 98.68 and the 98.45 levels.

Additional key levels

  • After challenging the 1.2214 resistance, the Cable is hovering near weekly lows.
  • The levels to beat for sellers are seen at 1.2156, followed by 1.2125 support levels.

GBP/USD daily chart

The Sterling is trading in a bear trend below the main daily simple moving averages (SMAs). The market is on the defensive for the third day in a row as GBP/USD is trading below the 1.2300 figure.

GBP/USD 4-hour chart

The Cable is trading below 1.2180 resistance and the 50/200 SMAs on the 4-hour time frame. GBP/USD bears are most likely looking for a break below the 1.2156 support and1.2125 level to potentially reach the 1.2065 level on the way down, according to the Technical Confluences Indicator.

GBP/USD 30-minute chart

GBP/USD is trading below the main SMAs, suggesting a bearish bias in the near term. Immediate resistances are seen at the 1.2180, 1.2194, 1.2214 and 1.2245 levels, according to the Technical Confluences Indicator.

Additional key levels

Previewing next week's key macroeconomic events in the United States, "We look for the ISM index to retreat modestly to 51 for August, continuing to reflect the subdued outlook for manufacturing," said TD Securities analysts. "We also expect payrolls to trend lower to 145k in August, driven by a moderation in manufacturing employment and slower job creation in the services sector."

Key quotes

"The unemployment rate should remain steady at 3.7%, while wage growth likely declined to 3.0% y/y."

"A slew of Fed officials including Fed Chair Powell, NY Fed's Williams, and voters Evans and Rosengren will take the stage next week before the blackout period starts."

"We don't anticipate Chair Powell or Williams to deviate much from the Jackson Hole mantra of sustaining the current expansion; while Evans and Rosengren will likely state the dovish and hawkish case, respectively."

  • Russia's Novak says cuts in August will be lower than agreed with OPEC+.
  • Hurricane Dorian expected to weigh on US demand.
  • Baker Hughes' oil rig count coming up next in the session.

Easing concerns over a protracted US-China trade conflict and its potential negative impact on the global energy demand outlook allowed crude oil prices to gain traction earlier this week. Moreover, the weekly crude oil stock report published by the US Energy Information Administration showed a draw of more than 10 million barrels last week and provided an additional boost.

Rally loses steam on Friday

After testing the $53 on Monday, the barrel of West Texas Intermediate rose all the way up to $56.86 but failed to preserve its bullish momentum. With the latest comments from Russian Energy Minister Alexander Novak and fears over the impact of Hurricane Dorian, which continues to gather strength and could hit Florida over the weekend, on the US energy demand forced the WTI to make a sharp U-turn on Friday.

Ahead of the Baker Hughes Energy Services' weekly oil rig count data, the WTI is trading near $55, erasing 2.8% on a daily basis.

RIA and Interfax news agencies today quoted Novak saying that Russia's oil output cuts in August will slightly stay below those agreed with OPEC+. "Russia is aiming for full compliance with the deal despite a slight increase in output in August," Novak further added but the selling pressure on crude oil remained intact.

Technical levels

  • Market sentiment turns sour in second half of day.
  • US Dollar Index stretches higher toward 99 mark.
  • Wall Street's main indexes pare early gains, fall into negative territory.

The USD/JPY pair failed to capitalize on the broad USD strength in the second half of the day and is now moving in the negative territory near the 106.20 mark, losing 0.25% on a daily basis.

Market sentiment turns sour

Easing concerns over a prolonged US-China trade conflict allowed the risk-appetite to return to markets in the second half of the week and made it difficult for the traditional safe-haven JPY to find demand. The 10-year US Treasury bond yield posted strong recovery gains on Thursday and pushed higher on Friday to reflect the upbeat sentiment and major equity indexes in the US started the day in the positive territory.

However, with stocks erasing their early gains and T-bond yields slumping into the negative territory, the pair came under a renewed selling pressure. Although there were no fresh catalysts behind that shift in the risk perception, the JPY looks to close the day on a strong note.

On the other hand, a sharp fall witnessed in the EUR/USD pair in the last hour seems to be ramping up the demand for the Greenback, limiting the USD/JPY pair's losses for the time being. At the moment, the US Dollar Index is at its highest level since August 1 at 98.82.

Earlier today, the data published by the US Bureau of Economic Analysis showed that the core Personal Consumption Expenditure (PCE) Price Index, the Fed's preferred gauge of inflation, on a yearly basis stayed unchanged at 1.6% as expected to support the USD.

Technical levels to watch for

  • EUR/USD falls to 2-year lows as the Greenback strengthens across the board.
  • The level to beat for bears is the 1.1016 support followed by the 1.1039 level.

EUR/USD daily chart

On the daily time-frame, the shared currency is trading in a bear trend below the main daily simple moving averages (DSMAs). EUR/USD just broke to its lowest since 2017.

EUR/USD 4-hour chart

The bearish pressure is unabated as the market reached 2-year lows. The market is challenging the 1.1016 support while the next level is 1.1039. If broken, the market could precipitate towards 1.0870, according to the Technical Confluences Indicator.

EUR/USD 30-minute chart

EUR/USD is trading below the main SMAs, suggesting a bearish momentum in the near term. Immediate resistances are seen at 1.1016, 1.1039 and 1.1056 levels, according to the Technical Confluences Indicator.

Additional key levels

According to the latest GDPNow report published by the Federal Reserve Bank of Atlanta, the real GDP in the US is expected to expand by 2% in the third quarter of the year.

"After yesterday's and this morning's releases from the US Census Bureau and US Bureau of Economic Analysis, the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real nonresidential equipment investment growth decreased from 3.4% and 4.4%, respectively, to 3.2% and -0.5%, respectively," Atlanta Fed said in its publication.

According to the Federal Reserve Bank of New York's latest Nowcasting Report, the US economy is expected to expand by 1.8% in the third quarter of the year.

"News from manufacturing, prices, and personal consumption data were small, leaving the nowcast broadly unchanged," NY Fed said in its weekly publication.

The US Dollar Index, which tracks the dollar's value against a basket of six major currencies, didn't react to the data and was last up 0.3% on the day at 98.75.

EUR/USD has fallen below the previous 2019 low of 1.1027 and is nearing the psychologically critical level of 1.1000. It is trading at the lowest levels since 2017.

Update: The world's most popular currency pair extends its slide and breaks below 1.1000. At the time of writing, EUR/USD's new trough is 1.0990.

Below 1.1000, the next support lines are 1.0960, 1.0900, and 1.0810. Initial resistance awaits at 1.1027, followed by 1.1050, and 1.1090.

The euro has been under pressure after euro-zone core inflation figures dropped to 0.9% Yoy and German retail sales plunged by 2.2%. The European Central Bank is set to introduce a significant package of monetary stimulus on September 12th.

US data has been mixed with upbeat personal spending figures and downbeat consumer sentiment. Signs of a US recession are growing – but the greenback remains strong.

Here is how the move looks on the four-hour chart, where the Relative

EUR USD technical chart August 30 2019

More:

  • EUR/USD Forecast: Will it fall off the cliff? Disappointing data is pushing it closer
  • EUR/USD Technical Analysis: Outlook remains negative while below the support line at 1.1157