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Euro gains amid heightened demand for risk assets

The EURUSD pair advanced 0.26% to 1.1839 on Wednesday, September 1. The single currency started to strengthen ahead of the European open amid mounting risk appetite. The uptrend gained momentum, reaching 1.1857 after the release of a weaker-than-expected ADP print stateside.

US private payrolls totaled 374k in August, up from 326k in July (vs. the median consensus that called for 613k). The ADP may act as an additional signal that the Fed is in no rush to curb stimulus.

The downturn in the dollar was halted by the US manufacturing PMI. The manufacturing activity index increased to 59.9 in August, up from 59.5 in the previous month. Activity advanced on the back of strong growth in orders. However, the employment sub-index slid from 52.9 to 49.0.

Todays macro agenda (GMT+3)

12:00 Eurozone: PPI (July)

15:00 US: factory orders (July)

15:30 Canada: building permits (July); US and Canada: trade balance (July); US: unit labor costs (Q2), non-farm productivity (Q2), and weekly initial jobless claims

Current outlook

Virtually all major currencies have been trading in positive territory, except for the franc in Asian trading on Thursday, September 2. Heightened demand for risk-sensitive assets has again been seen on the FX market during morning session. Topping the leaderboard are the aussie and the kiwi. Today’s economic calendar is nearly a blank slate. As for the key events, we note factory orders for July. This is hardly a driver, since the data point refers to July, not August.

Technical analysis

The euro was trading at 1.1843 by the time of writing as price action moves within an ascending channel. Gains stopped at the 157-degree angle on Wednesday, while correction from 1.1857 was negligible. Given today’s heightened demand for risk assets, the euro may well extend its upward march to 1.1865/70.

Seven tops were formed over the past nine trading days from a low of 1.1664 to 1.1857 (+190 pips). Each of the corrections amounted to about 40 pips. On the daily TF, price action is hovering near a resistance level (formed by connecting a line through the 1.1975 and 1.1909 tops). Unless European participants support the morning gains, a downward correction will get under way in the run-up to tomorrow’s payrolls. A close today above 1.1890 would imply that the market is set to head for 1.2100.

Bottom line: On Wednesday, the single currency strengthened against the dollar amid heightened appetite for risk-sensitive assets, as well as a sluggish ADP report. Major currencies have been trading in positive territory on Thursday, but after the formation of seven peaks on a 190-pip rally, the risk of a downward correction is on the rise. Players are advised to refrain from buying now, as a key data point for the Fed (NFPs) is due out on Friday.

EURUSD-020921

 

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