The decline in anti-risk sentiment, rumors about the health of US President Donald Trump and uncertainty about the prospects for additional assistance to the US economy - all these fundamental factors put pressure on the dollar. Even the ISM index in the non-manufacturing sector, which was in the green zone, did not help the greenback: today, the dollar index retreated from the local low of 93.90 to the current value of 93.40. In turn, the European currency received support today from the September PMI indices, which were revised up.
This combination of fundamental factors made it possible for EUR/USD buyers to take control of the situation, directing the price towards the upper limit of the flat range of 1.1630-1.1820 (the lower line of the Bollinger Bands is the upper limit of the Kumo cloud on the daily chart). But the bulls need an informational impulse to break the upper limit of this range. While we only see an "accumulation of negative potential" against the US currency at the moment. By and large, the pair is growing only due to the weakening of the greenback, while European fundamentals play a secondary role.
Still, today's releases should not be ignored. The German index of business activity in the service sector was unexpectedly revised up. If the initial estimate was at 49.1 points, the final one is at 50.6 points. As you know, all values above the 50-point mark reflect an improvement in the situation, and vice versa. Therefore, in this case, the revision of the indicator was not a mere formality. PMI business activity indices in the service sector also came out in the green zone in other key European countries (except Spain). We were also pleased with the pan-European composite purchasing managers' index, which similarly turned out to be higher than the forecast level.
One more release today is worth mentioning separately. This is an indicator of retail trade in the eurozone countries. This indicator of consumer activity fell into negative territory in July, reflecting a slowdown in inflation processes. However, the August data showed significant growth, both in annual and monthly terms. According to forecasts, this indicator was expected to grow to 2.4% m/m and 2.2% y/y. However, in reality, the indicators rose by 4.4% and 3.7%, respectively. It is worth recalling that we received failed data on the growth of European inflation last Friday. Commenting on this release, the European Central Bank vice president complained about low consumer demand. Today's data partially offset pessimism about the prospects for the pan-European CPI.
However, all the above-mentioned successes of European data only provided background support for the euro. The dollar was the main driver of EUR/USD growth, which is showing weakness again today. And if the dollar index slowly slid down during the European session, then the downward dynamics intensified during the US session.
In general, the greenback is trading in conditions of increased uncertainty. Speculation about the health of Trump, as well as conflicting news on the topic of fiscal stimulus for the US economy, do not allow dollar bulls to show character. Traders can't find a firm foothold that would allow the greenback to claim an advantage. Even Nonfarm, which was published last Friday, left a mixed impression. On the one hand, the unemployment rate fell below the 8% mark, and the number of people employed in the manufacturing sector increased by 66,000 (with a forecast of 32,000). On the other hand, we were disappointed with wages, which are particularly important for the dollar in the context of the Federal Reserve's updated strategy. In addition, the number of people employed in the non-agricultural sector increased by only 660,000, while most analysts expected to see this indicator much higher (985,000). In other words, the Nonfarm report did not become a catalyst for the greenback's growth.
Dollar bulls were also puzzled by Trump, who contracted the coronavirus last week. He held a kind of performance during the weekend: in his motorcade, he toured the hospital area, greeting his supporters. At the same time, the press reported that Trump may be discharged on Monday. But today it became known that Trump was not only not discharged, but also began to be treated for COVID-19 with dexamethasone, a drug that is prescribed to seriously ill patients. This was reported by the Associated Press, citing its own sources. According to their information, doctors began using the steroid drug after the oxygen level in Trump's body dropped to 93%. According to some doctors who commented on this information, the use of dexamethasone implies "a higher degree of severity of the situation." By the way, while in the hospital, he wrote more than 20 tweets in just two hours today – and in all caps. In each of them, he called for voting for himself in the presidential election, and also told how bad it would be for Americans under the Democrats. This abnormal and somewhat unbalanced activity of Trump also alerted investors.
In addition, the US dollar is under pressure amid ongoing negotiations between Democrats, Republicans and the White House. Today, White House Chief of Staff Mark Meadows said that "the deal has potential." But judging by the dollar's reaction, traders are already skeptical of such statements. Let me remind you that similar theses were voiced last week by the US Treasury Secretary, who even announced serious progress in this direction until the beginning of October. But, as you know, "things are still there." Therefore, the market ignored the signals from the White House.
Thus, the EUR/USD pair has every reason for further upward movement – at least to the upper limit of the flat range, that is, to the 1.1820 level (the upper limit of the Kumo cloud on the daily chart). A break of this resistance level will open the way for buyers to the main resistance level of 1.1900 (the upper line of the Bollinger Bands on the same timeframe).
