Current trend

During the Asian session, the EUR/USD pair is testing 1.1165 for a breakout. Market activity is cooling ahead of the release of September eurozone business activity data from S&P Global at 10:00 (GMT 2), which is expected to show little change, particularly in the manufacturing sector, which is likely to show negative dynamics again. On Tuesday, Germany will also publish data from the Institute for Economic Research (IFO): in September, the Business Climate index could fall from 86.6 points to 86.1 points, the Expectations indicator — from 86.8 points to 86.3 points, and the Current Assessment indicator — from 86.5 points to 86.0 points.

Earlier, European Central Bank (ECB) President Christine Lagarde noted the confident pace of inflation slowdown with minimal job losses, predicting that the indicator will reach the target of 2.0% by 2025. However, the official stressed the high level of uncertainty as the global economy is currently facing "transformational changes" and against this backdrop the regulator is likely to keep borrowing costs unchanged in October. The timing of the softening of the rhetoric will depend on the improvement of key indicators: the growth of labor costs is slowing despite weak productivity, and companies are partially indexing the wages of their employees, which in the long term will support the process of disinflation.

American investors are assessing the results of the two-day meeting of the US Federal Reserve, which ended last week: as expected, the interest rate was reduced to 5.00%, while until the very end market participants doubted if the step of the adjustment would be 25 or 50 basis points, and during the week the latter scenario was not considered a priority. Earlier, the Fed published an updated forecast for the interest rate, which assumes reaching 4.40% by the end of this year and 3.40% by the end of 2025.

Support and resistance

Bollinger Bands in the daily chart show unsteady growth. The price range expands from above, freeing a path to new local highs for the "bulls". MACD indicator is growing, while preserving a rather stable buy signal (located above the signal line). Stochastic, after an uncertain attempt to reverse downwards at the beginning of the last trading week, is heading upwards again, being in the area of its highs and indicating the risks of the single currency being overbought in the ultra-short term.

Resistance levels: 1.1200, 1.1243, 1.1300, 1.1350.

Support levels: 1.1150, 1.1100, 1.1050, 1.1000.

Trading tips

Long positions can be opened after a breakout of 1.1200 with the target of 1.1300. Stop-loss — 1.1150. Implementation time: 2-3 days.

The return of a "bearish" trend with the breakdown of 1.1150 may become a signal for short positions with the target at 1.1050. Stop-loss — 1.1200.