EURUSD, DXY Outlook: July 2023 Resistance/Support

EURUSD, DXY Outlook: The EURUSD is just one resistance level away from a potential bull run above its July 2023 high, while the DXY continues to respect the July 2023 support levels. Next week’s US employment and ISM PMI indicators are expected to be critical in confirming either a reversal or a breakout for both pairs.

Key Events for today

US Core PCE (the Fed’s preferred inflation gauge) Week Ahead
US ISM Manufacturing PMI (Tuesday)
JOLTS Job Openings (Tuesday)
ADP Non-Farm Payrolls (Wednesday)
ISM Services PMI (Thursday)
Non-Farm Payrolls (Friday)

Following today’s US Core PCE data, next week’s ISM manufacturing and services PMIs are expected to inject volatility into the markets ahead of Friday’s non-farm payrolls. The ISM Manufacturing PMI has been consistently underperforming since May, while the ISM Services PMI has been showing strength, raising concerns about the risks to declining inflation rates.

The Non-Farm Payrolls on Friday pose the highest risk for market movements, likely influencing the market’s view on the upcoming Fed decision for November. The data could tip the balance between a 25 bps and 50 bps rate cut, shaping a clearer trend for both the EURUSD and DXY as we head into October.

DXY Outlook: 3D Time Frame – Log scale

DXY outlook: DXY_2024-09-27_12-35-08

Source: Tradingview

The US Dollar Index (DXY) has been consolidating above the July 2023 support, holding steady above the 100-mark for the past month. The overall trend suggests a bearish bias, with lower highs and lower lows. However, the Relative Strength Index (RSI) is diverging positively from the chart’s oversold zone, signaling a bullish/neutral tone.

Despite the 50-bps rate cut, the DXY has maintained its support level from July 2023. Attention is now on the upcoming non-farm payrolls to determine if a breakout or significant rebound is in store.

EURUSD Outlook: 3D Time Frame – Log scale

EURUSD Outlook EURUSD_2024-09-27_12-47-08

Source: Trading view

On the 3D time frame, the RSI is showing negative divergence, hinting at potential bearish pressure below the July 2023 resistance zone. A breakout above the 1.1220 resistance could pave the way towards the next levels at 1.13 and 1.15.

On the downside, support levels are found at 1.10 (September low), 1.09 (trendline connecting the July and December 2023 highs), and 1.0780 (August low), which could provide support if the pair pulls back from the 1.12 resistance.

--- Written by Razan Hilal, CMT – on X: @Rh_waves

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