FX.co ★ EUR/USD analysis and forecast for October 7, 2021

It seems more risky to buy

Hello, dear colleagues!

As it was expected the day before, at yesterday's trading the main currency pair of the Forex market continued its downward movement. Yesterday, demand for the US dollar as a safe haven asset again remained strong. Besides, investors were concerned about the spread of the COVID-19 pandemic and the rising inflation, which might encourage the Federal Reserve System (Fed) to tighten its monetary policy, following the dollar's strengthening. It was highly expected that the Fed might start cutting its quantitative easing (QE) program as early as November, which results in possible interest rates increase in the United States.

In general, it is evident that the US currency is getting stronger. Besides, investors are still awaiting tomorrow's US labor reports, which may provide hints about the tapering its asset purchase program. These facts were already mentioned. However, the technical picture of EUR/USD is also quite favourable for the US dollar strengthening against the euro. Before considering the price charts, let's outline the most important events of the day, which may influence the EUR/USD dynamics. At 14:30 Moscow time the ECB report on monetary policy is due. It is possible to highlight the US initial jobless claims which will be released at 15:30 (Moscow time). Besides, yesterday's ADP employment data turned out better than forecasted. It likely suggests strong non-farm payrolls reports, which will be published tomorrow.

Daily

Notably, yesterday's expectations about the pair's further decline were fulfilled, and one of the targets at 1.1535 was achieved. Consequently, dealers who kept to this forecast and used it during trading, managed to take profit after the quotation rate reached 1.1535. At the same time yesterday's daily candlestick had a rather long bottom shadow, which indicates a rate adjustment, especially regarding the US labor market data release tomorrow. According to the daily chart, there is a resistance for the sellers at 1.1600, 1.1640 and 1.1664. Support is at 1.1530 and 1.1500. This last level is considered psychological and extremely important for market participants. I may assume that in case the trading is conducted at this level, the pressure on the pair will increase. However, I would like to indicate that market players should not break this most significant level before the US labor reports release.

H1

On the hourly chart, the possibility of correction is confirmed by the current rise of the EUR/USD pair. However, there are 50-simple and 89-exponential moving averages at 1.1574 and 1.1584. They may prevent the pair from rising and turn the rate southward again. Despite the possibility of a corrective rebound, it is quite risky to buy now, while approaching the mentioned moving averages and against the current downtrend. I suggest monitoring the price dynamics around 1.1574-1.1584, and in case reversal patterns of candlestick analysis appear on this or 4-hour charts, it is possible to open positions to sell the EUR/USD pair. It seems more risky to buy. Finally, ahead of tomorrow's US labor market data, I do not recommend setting large goals for open positions.

Good luck!