The Euro ticked higher but holding in neutral mode just above Thursday’s low at 1.1092 in early Friday’s trading.
The single currency closed in red on Thursday after being initially boosted by better than expected French PMI data, but lost ground on weak German / EU manufacturing PMI’s which add to rising concerns as the is bloc on the brink of recession.
Neutral to dovish comments from Mario Draghi after the ECB kept the policy unchanged, as expected, contributed to further weakness.
Mario Draghi, at his last policy meeting as he steps down from the position of central bank’s president on 31 Oct, again defended his decision to resume asset purchase in order to keep the EU economy afloat and his famous pledge from 2012 ‘whatever it takes’ to save the euro.
Draghi also said to his successor Christine Lagarde to never give up in supporting the EU’s economy amid worsening global economic outlook and little help from bloc member countries governments.
Thursday’s close generated negative signal on formation of bearish outside day and marginal close below pivotal support provided by daily cloud top (1.1105), but the action was contained by rising 10DMA, which continues to hold for now.
Near-term action is hovering around daily cloud top and awaiting fresh signals.
German Ifo business climate is in focus today (Oct 94.5 f/c vs Sep 94.6) as the indicator is in downtrend in past one year and holding below 100 mark for the fifth straight month.
Weaker than expected Oct figure would add to negative outlook for the German economy and increase pressure on euro.
Break and Friday’s close below 10DMA (1.1103) is needed to confirm bearish outside day pattern and will be negative signal for the next week’s action.
Extension below 10DMA would open way towards supports at 1.1064 (Fibo 38.2% of 1.0878/1.1179) and 1.1044/34 (converging 55/20DMA’s).
Alternatively, repeated close above 10DMA would validate the support with subsequent bounce to generate initial signal of correction, which would require confirmation on extension above 100DMA (1.1130).
Res: 1.1112; 1.1130; 1.1162; 1.1179
Sup: 1.1103; 1.1092; 1.1064; 1.1044