After being mostly unchanged for most of the trading session, the euro collapsed in the late trading session on the back of strong economic data coming out of the US economy which led to a resumption of the rally in the dollar. It was reported today that US factory orders rose broadly in line with forecasts in June which was seen as a huge positive for the dollar. It is imperative to state that the dollar has been in a strong uptrend since the beginning of the year on the back of expectations that the Federal Reserve might hike short term interest rates for the first time in seven years. The dollar lost ground on Monday on the back of disappointing economic data which showed that manufacturing activity in the US economy moderated in the month of July.
Traders and investors would be closely watching the release of the nonfarm payroll report on Friday which would provide an insight into the strength of the US Labour market. Many economists believe that the US economy would show additions of 250,000 jobs in July which could provide the Federal Reserve to go ahead with a rate hike for the first time in seven years and would be seen as a huge negative for the euro.
When looking at the charts for the euro, the currency has been in a strong downtrend over the past many weeks. The momentum indicators for the euro continue to remain under pressure which is indicative of the fact that bears are in total control at the current moment. The relative strength index has been forming lower highs which is indicative of the lack of inherent strength and is seen as a bearish indicator. It is imperative to state that the euro currently trades below important daily moving averages.