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Summary: Disappointing initial jobless claims data in the US, coupled with new selling pressure on the US dollar and US Treasury yields, is propelling the EURUSD towards 1.0900. Market sentiment may cap the upside potential for this asset ahead of speeches by Fed officials.

Fundamentals

Thursday's data from the US Department of Labor revealed an increase of 13,000 in initial jobless claims to 231,000 for the week ending November 11, surpassing the market expectation of a 220,000 increase. With demand subdued due to rate hikes, the labor market is cooling down.

The report showed a rise of 32,000 in continuing jobless claims to 1.865 million for the same week, marking continuous increases since September. Market participants attribute this growth to the difficulty of adjusting data for seasonal fluctuations rather than a substantive change in the labor market. They anticipate that this issue will be resolved when the government revises the data next spring.

Overall, the greater-than-expected increase in initial jobless claims in the US last week suggests a continued easing of labor market conditions. This development could potentially assist the Fed in its efforts to combat inflation, which is dollar-negative.

The US dollar traded narrowly on Thursday. After the collapse on Tuesday, both bulls and bears showed limited activity, especially on the buy side. Despite the significant drop in prices on Tuesday, buyers have struggled to initiate short-covering.

Traders will be looking for further clues and confirmation of whether the Fed has indeed completed its rate hikes, and bets on when the Fed will first cut rates are increasing. Meanwhile, as yields decline and the stock market surges, the interest rate differentials between the dollar and other currencies are losing significance.

Technical Analysis

The 4-hour chart for the EURUSD indicates the establishment of lower lows, but a quick rebound towards the top of Tuesday's high. Simultaneously, the asset continues to develop above all its moving averages, with the 100 and 200 SMAs failing to establish a clear direction in the price range of 1.0790-1.0800. The 20 SMA is accelerating upwards, significantly below the longer-term moving averages. Meanwhile, technical indicators have stabilized near overbought levels with a slight upward movement but lack clear directional strength.

Recent technical conditions favor an upward movement, but the upside potential is relatively limited. The RSI and MACD have corrected their extreme overbought readings and are targeting a recovery, reflecting increased buying interest. At the same time, the 20 SMA is nearly vertical below the current level but well above the long-term moving averages. A resumption of the bullish momentum may occur when breaking through the immediate resistance at 1.0890, but the upside is constrained within the range of 1.0900-1.0945.

In the coming trading days, we might witness the price developing towards this range. However, a market drop below the 1.0765 region would negate all positive progress made this week. In terms of trading strategy, given the relatively crowded upside space, a preference for going short at highs is recommended.

Trading Recommendations

Trading Direction: Short

Entry Price: 1.0900

Target Price: 1.0700

Stop Loss: 1.1000

Valid Until: 2023-11-30 23:55:00

Support: 1.0802, 1.0764, 1.0756, 1.0700

Resistance: 1.0887, 1.0945, 1.0959, 1.1000