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Deep Oversold Conditions Could Support a Recovery Move
Central Bank
Economic
Summary:
The signal lines remain deeply positioned within bearish territory, indicating that any upside movement should still be viewed as a corrective retracement rather than the beginning of a broader trend reversal.
Buy
CLOSEDEURUSD
End Time
1.12173
Entry Price
1.13630
TP
1.11200
SL
1.12380 -0.00208 -0.18%
409
Points
Profit
1.11200
SL
1.12582
CLOSING
1.12173
Entry Price
1.13630
TP
European Central Bank (ECB) Chief Economist Philip Lane stated on Monday that higher energy prices and rising long-term borrowing costs are already beginning to slow demand, a development that could limit how much further the ECB will need to raise interest rates.
Separately, Bundesbank President Joachim Nagel noted that there are still no clear signs that inflation pressures are feeding through to wages and broader pricing behavior, suggesting that underlying inflation dynamics remain contained despite elevated price levels.
Recent economic data from the Eurozone have provided some encouraging signals. The HCOB Eurozone Composite PMI rose to 53.1 in September from 52.0 previously, while the Services PMI advanced to 53.0 from 51.6, confirming an acceleration in private-sector activity and indicating that economic momentum remains resilient despite ongoing uncertainty.
Concerns remain focused on France, where high debt levels, a widening budget deficit, and uncertainty surrounding the government's ability to secure approval for its 2027 budget continue to fuel tensions in the bond market. Political uncertainty is also increasing in Spain after Prime Minister Pedro Sánchez called an early election amid growing protests linked to the country's housing crisis.
In the United States, the final S&P Global Services PMI was revised slightly higher to 58.8 in September from the preliminary estimate of 58.7. Meanwhile, the Institute for Supply Management (ISM) Services PMI declined to 54.9 in September from 55.4 in August, coming in slightly below market expectations of 55. Despite the decline, the indicator remains comfortably above the 50 threshold that separates expansion from contraction.
Attention remains centered on Friday's weaker-than-expected employment report, which showed that Nonfarm Payrolls (NFP) increased by just 29,000 jobs in September, well below forecasts of 90,000. Job gains from the previous two months were revised lower by a combined 60,000 positions, while the unemployment rate edged up to 4.2%. At the same time, annual wage growth slowed to 3.0%.
According to the CME FedWatch Tool, traders now assign only around a 20% probability to a rate increase in October, compared with nearly 70% a week ago. However, the broader monetary policy outlook continues to lean toward additional tightening, as policymakers remain concerned about inflation staying above the Federal Reserve's 2% target. In addition, tensions in the Middle East continue to keep energy-driven inflation risks present within the market outlook.
Technical Analysis
EURUSD declined sharply overnight during a period of relatively thin liquidity, reaching a low of 1.1161. However, the pair quickly recovered above the 1.1170 level as the Asian session progressed, highlighting the presence of buyers near recent lows. The strong bullish reaction suggests that a corrective recovery may be developing, with the resistance area at 1.1363 emerging as a potential upside target in the sessions ahead.
The 100-period and 200-period moving averages are also approaching this region and are currently located at 1.1409 and 1.1521 respectively. As these indicators continue to move closer to the resistance zone, they could reinforce the technical significance of the area and align with a potential corrective move higher.
In the oscillator area, the RSI is currently trading near 37, although it recently dropped to 18.89, entering extreme oversold territory. Such conditions increase the probability that a rebound could remain on the table over the coming sessions as selling pressure begins to ease. Meanwhile, the MACD histogram has recently crossed into bullish territory, signaling improving momentum. However, the signal lines remain deeply positioned within bearish territory, indicating that any upside movement should still be viewed as a corrective retracement rather than the beginning of a broader trend reversal.
Trading Recommendations
Trading direction: Buy
Entry price: 1.1218
Target price: 1.1363
Stop loss: 1.1120
Validity: Oct 16, 2026 15:00:00
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