EUR/USD rises for second day in a row but bearish trend remains

EUR/USD rises for second day in a row but bearish trend remains
Written by:
Crispus Nyaga
29th September, 13:03
Updated: 29th September, 13:04
  • The EUR/USD pair has risen for two days in a row as traders wait for the first Trump-Biden debate.
  • The pair is also reacting to the strong services and industrial confidence data.
  • It is ignoring the weak inflation data from Germany.

The EUR/USD pair is up for the second straight day ahead of the first presidential debate between Donald Trump and Joe Biden. The pair is also reacting to the relatively sentiment data from Europe. It is trading at 1.1700, which is substantially higher than the Friday’s low of 1.1612.

EUR/USD in high spirits

Dollar slides ahead of Joe Biden and Trump debate

The EUR/USD pair is rising in part because of the overall weaker US dollar as traders wait for the first debate between Joe Biden and Trump. The currency has declined by 0.50% against the Swedish krona, 0.25% against the Swiss franc, and 0.30% against the sterling.

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In the debate today, the two presidential candidates are expected to explain their plans about the economy and other issues.

The debate comes at a time when congressional Democrats and the White House are deliberating on the next stimulus package. Democrats have proposed spending about $2.5 trillion, a figure that is lower than their previous plan. This figure is a trillion higher than what the White House is advocating. It is also $1.5 trillion higher than what Republicans are willing to spend.

The stimulus debate matters because analysts say it is necessary to support the American economy. Indeed, recent data has shown that the economy started to slow when the enhanced unemployment benefits expired in May.

Eurozone confidence rises as Germany inflation declines

The EUR/USD is also reacting to the relatively strong confidence data from the Eurozone. The data showed that industrial sentiment increased from -12.7 to -11.1. Similarly, sentiment in the services sector rose from -17.2 to -11.1.

Another data showed that consumer confidence remained at -13.9 while the business and consumer survey rose to 91.1. These numbers show that the European economy is making steady progress.

Further, the EUR/USD is reacting to the rising optimism that the European Union and the United Kingdom will make progress in this week’s Brexit talks.

Meanwhile, the pair has ignored the disappointing German inflation data. The data showed that the headline CPI declined to -0.2% in September while the harmonised inflation fell to -0.4%. As the biggest economy in Europe, the data shows that the ECB will have a challenge dealing with deflation. We will receive the preliminary CPI data from the EU tomorrow.

EUR/USD technical outlook

EUR/USD technical analysis

The EUR/USD pair is in its second consecutive day of gains. The daily chart shows that the pair is a few pips below the 23.6% Fibonacci retracement level. Also, the 15-day and 25-day exponential moving averages have made a bearish reversal. Therefore, I expect that the pair will resume the downward trend as bears attempt to move below the 1.1600 level.

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