EUR/USD struggles to recover above 1.18, looks to close third straight day lower
- EUR/USD is on its way to close the day below the 100-DMA.
- DXY sticks to modest daily gains near mid-93s.
- Private sector shows health employment growth in the U.S.
The EUR/USD pair touched its lowest level in two weeks at 1.1780 during the American trading hours on Wednesday before staging a modest recovery. Nonetheless, the pair is having a difficult time retaking the 1.18 handle and remains on track to close the fourth day in a row with losses. As of writing, the pair was trading at 1.1794, losing 0.26% on the day.
Labor market continues to tighten in the U.S.
Today's data from the United States revealed that the private sector employment increased by 190,000 on a monthly basis in November following October's 235,000 increase. Despite that retreat, however, the reading came above the market expectation of 185,000. Commenting on the ADP's report, "the job market is red hot, with broad-based job gains across industries and company sizes," Mark Zandi, chief economist of Moody’s Analytics, noted.
According to other data released by the Labor Department, unit labor costs, the price of labor per single unit of output, contracted by 0.2% in the third quarter. Although this data points to a soft wage growth, some experts think that it may be misleading. "We believe that the official wage income data being used for calculations have been distorted recently by income reporting being delayed in anticipation of tax cuts, and Commerce Department analysts may be misinterpreting information from quarterly tax records," Jim O‘Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, told Reuters.
Boosted by the upbeat ADP report, which points to a solid NFP reading on Friday, the US Dollar Index advanced to 93.62, its best level since November 22, and remained steady around that level in the remainder of the session. At the moment, the index is at 93.58, up 0.33% on the day.
- NFP preview: Payrolls expected to rise by 220K - Wells Fargo
On Thursday, ahead of the weekly initial jobless claims from the United States, the real GDP growth from the euro area will be released. The GDP is expected to expand by 0.6% and 2.5% in the third quarter on a quarterly and yearly basis respectively. Although it's unlikely, a higher-than-estimated reading could help the shared currency retrace some of its losses.
Valeria Bednarik, American Chief Analyst at FXStreet, writes, "the pair retains its bearish stance heading into the Asian opening, below its 100 SMA in the daily chart for the first time in three weeks. Shorter term, and according to the 4 hours chart, the risk also leans towards the downside, as the price has fallen further below its 20 and 100 SMAs, with the shortest gaining downward traction above the largest, as technical indicators continue nearing oversold territory. The 1.1820/30 region is now the immediate resistance ahead of the 1.1870 price zone, where selling interest capped the upside ever since the week started."
According to the analyst, supports could be seen at 1.1760, 1.1725, and 1.1685, while resistances align at 1.1825, 1.1870, and 1.1910.