Buy EURUSD 1.0945 Stop 1.0880 Target 1.11 (Risk 0.50%, trade valid until 5PM EST)
EUR: The Eurozone’s manufacturing PMI printed at 45.7 in September, the lowest since October 2012, as new orders and output slipped further. In particular, the German manufacturing PMI also retreated to 41.7, the lowest since the GFC. ECB’s Draghi called for Eurozone-wide fiscal stimulus to boost investments, while Bundesbank’s Weidmann advocated an “intensive discussion” among policymakers on the recent stimulus measures that is “absolutely necessary”
USD: The greenback weakened against most of its G10 counterparts, the Dollar Index reversed previous session’s gain to fall back to the lower end of 99 as traders fled to traditional safe havens CHF and JPY. EUR and GBP rebounded. DXY closed 0.25% lower at 99.13. The Dollar is expected to trade on a weaker note today on renewed concerns over US economic growth as traders raised their bets on another Fed rate cut in end-October. Futures priced in 64% probability of a 25bps cut, a marked increase from Monday’s 40%.
From a technical and trading perspective tI am adding to Trade of The Week EURUSD Long positions, I have moved my stops to entry 1.0885 and I am going to add to my longs at 1.0945 with a 1.0880 stop. Yesterday’s reversal has flipped the near term VWAP bullish and suggests the potential for further recovery. This coincides with DXY’s sharp reversal from the year R1 test highlighted in my Weekly Market Outlook, setting up the potential for a DXY correction.
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