EUR/USD: What's new with the pair?

As the US enters a period of fiscal shutdown, and US employment is the focus of much of traders' attention this week, the EUR/USD has found a balance near its 20-day moving average. This shutdown period is due to the lack of agreement between Republicans and Democrats in the Senate on the budget, and is resulting in the systematic shutdown of a large portion of federal services, deemed non-essential.

"Historically, the average duration of shutdowns is between 8-9 days. But this time, it could be longer. The US administration seems to be embracing this, seeing a way to succeed where DOGE failed by laying off government workers. During this delicate period, the market will have to rely on private statistics like the ADP survey, which often contain methodological flaws," warns Christopher Dembik, Investment Strategy Advisor.

Indeed, this survey cast a chill. It was especially closely watched because Friday's federal figures (NFP) could be postponed due to the... shutdown, of course!

According to the monthly survey by ADP, the private sector in the United States unexpectedly lost 31K jobs in September, while the consensus was for 50K new jobs. This is unprecedented since March 2023. The August figure was also revised to show a loss of 3,000 jobs, compared to the initially estimated 53K job creations.

"The figures published this week, and in particular the ADP report, further validate the hypothesis that the labor market is in a sharp slowdown. This could even deteriorate further with the shutdown," says Bastien Drut. "As a result, there is no doubt that the Fed will continue its cycle of rate cuts: the question becomes 'will it accelerate this cycle?'" wonders the market specialist.

On the EU side, the euro, one of the benchmark barometers of risk appetite, is holding up, based on these monetary considerations and Wednesday's statistics. The German component of the September manufacturing PMI, initially estimated at 48.6, was finally revised to 49.6 in the final data. It should be noted that the score remains below the 50-point threshold, which separates a contraction from an expansion in the sector in question. Furthermore, updated estimates of consumer prices in the Eurozone are confirmed at +2.2% year-on-year, excluding food, energy, alcohol, and tobacco.

Right now, the EUR/USD is trading at $1.1717.

KEY CHART ELEMENTS
The break in the downward sloping line drawn in black does not, at this stage at least, cast doubt on the strength of the primary upward trend, but raises questions about the need for consolidation in the currency pair. We once again issue a neutral opinion on the EURUSD spot, wisely positioned within the Bollinger Bands (20; 2.5).

MEDIUM-TERM FORECAST
Based on the key chart factors we have mentioned, our view on the EUR/USD is neutral in the medium term.

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.1608 and resistance at $1.1835.