EUR/USD and GBP/USD at Key Support Levels Ahead of US Labour Market Data

The euro and pound continue to decline, approaching important support levels amid a stronger US dollar. Further moves in EUR/USD and GBP/USD will depend on incoming macroeconomic data, particularly developments in the US labour market.

Today, market attention will focus on economic data from Europe and the US. In the eurozone, services-sector business activity indices will be released, with weaker readings potentially keeping pressure on the euro. In the US, weekly labour-market data will be published, while additional attention will be paid to comments from Federal Reserve representative Christopher Waller. However, tomorrow’s employment report will be the key market reference point. Following the weak ADP reading, further signs of a cooling labour market could strengthen expectations of a more accommodative Fed policy and put pressure on the dollar, while stronger figures could support further dollar gains.

For the pound, domestic data and signals from the Bank of England will provide an additional point of reference. Services-sector business activity figures will be in focus, along with a speech by Bank of England Governor Andrew Bailey, whose comments could influence expectations for the central bank’s future policy.

EUR/USD

As expected, EUR/USD has tested the important 1.1580–1.1620 support area. The decline has so far slowed near the upper boundary of the 1.1520–1.1560 range formed in August. Weak eurozone data could push EUR/USD further into this range. A return above 1.1620, followed by a sustained move above this level, would weaken the current bearish scenario and create conditions for a corrective recovery.

Key events for EUR/USD:

• today at 10:15 (GMT+3): Spain Services Purchasing Managers’ Index (PMI);
• today at 10:55 (GMT+3): Germany Composite Purchasing Managers’ Index (PMI);
• today at 15:30 (GMT+3): US initial jobless claims.

GBP/USD

GBP/USD continues to play out the bearish “tower” pattern described earlier. A sustained move below the important 1.3500 support level keeps the risk of further declines towards the 1.3400–1.3440 area. A rebound from this zone could trigger a corrective recovery, while the bearish scenario could be considered invalidated after a sustained move above 1.3560.

Key events for GBP/USD:

• today at 11:30 (GMT+3): UK Services Purchasing Managers’ Index (PMI);
• today at 17:00 (GMT+3): US ISM Non-Manufacturing Purchasing Managers’ Index;
• tomorrow at 11:50 (GMT+3): speech by Bank of England Governor Andrew Bailey.

Overall, EUR/USD and GBP/USD remain in a downtrend near important support levels, although their further direction will depend on incoming macroeconomic data. Following the weak ADP report, tomorrow’s US employment report will be the key reference point. Further signs of cooling in the labour market could increase pressure on the dollar, while stronger figures could support further dollar gains and lead to continued declines in both currency pairs.

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