Daily Market Recap – EURUSD Dollar recovers with economic data, Euro bias remains negative

The dollar strengthened on Friday, helped by positive economic data, but was headed for its second week of declines, while commodity-linked currencies slipped as traders adjusted their positions after this week's sharp rise.

Better jobs and housing data and rising U.S. Treasury yields helped the dollar rise toward the end of yesterday's U.S. session, gains that it preserved in Asian hours.

Thursday's U.S. economic data supported the dollar. Weekly jobless claims unexpectedly fell by 6,000 to a 19-month low of 290,000, showing a stronger labor market than expectations of an increase to 297,000. In addition, in September existing home sales rose 7.0% monthly to an 8-month high of 6.29 million, which was above expectations of 6.10 million.

The dollar index is sitting on the 93.70 level, up from the three-and-a-half week low of 93.50 it hit a day earlier.

One wonders if we are at an inflection point, as the dollar has weakened and this doesn't really fit with the broader narrative that global growth is cooling and the Fed is on a path to taper its asset purchases, which should support the dollar.

The rally in commodity-linked currencies lost steam late Thursday and Friday in Asia as traders took profits.

China's continued aggressive intervention in the coal markets has had a significant impact on prices in the energy sector, so it is not surprising to see a reasonable correction in commodity currencies like the Australian dollar from very overbought levels.

The euro against the dollar is in a downtrend despite the rebound in recent sessions. The euro has failed to break through the former support which is now resistant at 1.1664. The negative bias is therefore still valid as long as prices are below this level.

A return of the EURUSD on breakout of yesterday's low towards a retest of the major support at 1.1525 is possible. On the flip side, a break of the 1.1664 but especially the bearish oblique would invalidate this bearish scenario and could lead to a rise towards the 200-period moving average.

 (Chart Source: Tradingview 24.10.2021)

In the near term, traders should observe the 1.1664 level as a potential signal of trend continuity to position themselves long on the EURUSD for a target of 1.17. Any hesitation in the run-up to this level should be seen as a sign of uncertainty and traders could look to short the pair with a target of 1.16, with 1.1525 in extension for the longer term.

Support & Resistance Levels:

R3       1.1806

R2       1.1700

R1       1.1664

S1        1.1600

S2        1.1525

S3        1.1450

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.