- EUR/USD has been struggling to regain recovery momentum.
- A four-hour close below 1.0975 could open the door for an extended decline.
- ISM Manufacturing PMI for April will be featured in the US economic docket.
EUR/USD has started the new week under modest bearish pressure and declined to the 1.1000 area. The pair faces key near-term support level at 1.0975. Ahead of the ISM Manufacturing PMI data from the US, the pair’s action could remain subdued with trading conditions remaining thin due to the Labour Day holiday in Europe.
Ahead of the weekend, the data from the US revealed that the Employment Cost Index, compensation costs for civilian workers, increased by 1.2% in the first quarter. This reading followed the 1% increase recorded in the previous quarter and came in above the market expectation of 1.1%. The US Dollar (USD) managed to stay resilient against its rivals after this data and didn’t allow EUR/USD to gather recovery momentum.
The ISM Manufacturing PMI in the US is forecast to edge higher to 46.6 in April from 46.3 in March. The inflation component of the survey, the Prices Paid sub-index, is expected to climb into expansion territory above 50.
Ahead of the US Federal Reserve’s policy announcements on Wednesday, investors might refrain from reacting to the ISM report. Nevertheless, a bigger-than-expected increase in the headline PMI combined with a strong inflation reading could help the USD gather strength, at least with the initial reaction, and vice versa.
EUR/USD Technical Analysis
EUR/USD trades at around 1.1000 on Monday, where the 50-period Simple Moving Average (SMA) is located. Slightly below that level, at 1.0975, the 100-period SMA acts as key support level. In the past two weeks, buyers defended this level several times. A four-hour close below 1.0975 could open the door for further losses and the pair could face interim support at 1.0950 (Fibonacci 23.6% retracement level) before targeting 1.0900 (psychological level, 200-period SMA).
On the upside, 1.1025 (20-period SMA) aligns as first resistance before 1.1050 (static level) and 1.1100 (2023-high, psychological level).