EUR/USD hesitates with US ADP employment data, Manufacturing PMI in tap

• The Euro pares gains and returns below 1.1750 despite a moderate uptick in Eurozone inflation.
• Consumer prices accelerated to 2.2% in the Eurozone in September, from 2% in August.
• In the US, the focus turns ffrom the government shutdown to August’s pauyolls, manufacturing activity data

EUR/USD has been capped 1.1780 earlier during Wednesday’s European session and is trading at 1.1735 at the time of writing, practically flat on the day. The Eurozone preliminary Harmonized Index of Consumer Prices (HICP) met expectations, and investors’ focus shifts away from the US Government closure to August’s US ADP Employment and the ISM Manufacturing PMI report.

Eurozone inflation data confirmed that price pressures accelerated to a 2.2% yearly rate in September from 2% in August, although the core inflation remained growing at a steady 2.3%. Monthly inflation eased to 0.1%, from 0.3% in the previous month, while the core HICP remained steady at 0.1%. All in all, figures in line with the market expectations that have failed to provide any further support to the Euro.

In the US, a last-minute vote in the US Senate failed to pass the Republicans’ funding bill, leading to the government’s closure. The economic impact should not be significant unless the situation extends in time. However, it might delay the release of the US Nonfarm Payrolls report on Friday, which is a key data point for the Federal Reserve’s monetary policy decision due in late October.

US JOLTS Job Openings data was mixed on Tuesday, showing a slight increase in job vacancies but less hiring. Later today, the ADP Employment Change report is expected to show that private payrolls increased by 50K in September, a poor reading compared with last year’s averages and further evidence that employment creation has stalled.

Daily digest market movers: The US Dollar struggles with the government closed

• The Euro is giving away gains as the US Dollar picks up from the multi-week lows hit after the US government confirmed the worst expectations and shut down earlier on Wednesday. Investors seem to be receptive to the USD, ahead of the US session opening, although the Greenback could need a strong positive surprise at the , the ADP Employment Change report to perform a significant recovery, which is unlikely to be the case.
• Data released by Destatis on Tuesday revealed that the German Consumer Price Index (CPI) accelerated to a 2.4% year-on-year pace in September, from 2.2% in August, beating expectations of a softer increase to 2.3%. Likewise, the HICP grew at a 2.4% pace, from 2.1% in the previous month and above the 2.2% market consensus.
• In the US, JOLTS Job Openings increased to 7.22 million in August from 7.20 million in July, beating expectations of 7.2 million openings, although the hiring rate eased to 3.2% from 3.3% in July, which adds to evidence of a deteriorating labour market and dampened investors’ optimism about the headline reading.
• Later on Wednesday, Automatic Data Processing (ADP) will release its September payrolls report, which is expected to show a net change of 50K new jobs, down from the 54K seen in August and well below the levels beyond 100K seen last year and at the beginning of this one.
• The US ISM Manufacturing PMI is expected to show a moderate improvement to 49.0 in August from 48.7 in July, still at levels consistent with a contracting business activity. The Dollar needs positive surprises, preferably in both areas, to extend the frrail recovery attempts seen earlier on the day.

Technical Analysis: EUR/USD resistances at 1.1760 and 1.1790 are holding bulls

EUR/USD maintains the immediate bullish trend in play, although momentum is faltering. The 4-hour chart Relative Strength Index (RSI) has turned down to levels right above 50, currently at 52, and the Moving Average Convergence Divergence (MACD) is flattening. The US Dollar Index, on the other hand, remains subdued near lows, which keeps the pair’s downside attempts limited for now.

Bulls have been rejected at the 1.1780 area earlier today, a few pips below the reverse broken trendline, which now lies right above 1.1790. A successful break of that level would cancel the bearish trend from mid-September highs and shift the focus towards the September 23 and 24 highs, near 1.1820.

To the downside, immediate support is at the 1.1710-1.1715 area, where the pair was contained on Tuesday. Further down, last week’s lows at the 1.1645-1.1655 area and the September 2 and 3 lows, near 1.1610, come into focus.