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  • EUR/USD trades around session tops near 1.0940.
  • US ADP report came in a tad below estimates in September.
  • Further sideline trading expected ahead of Payrolls on Friday.

After a brief test of daily lows in the 1.09 neighbourhood, EUR/USD has managed to regain some shine and us now back around the 1.0940 region, coincident with daily highs.

EUR/USD now looks to NFP

The pair is so far failing to extend the bounce beyond the key resistance area around 1.0950, where appears to be a cluster of selling orders. If this area is cleared, minor hurdles are located at 1.0963 and 1.1003, the 10-day and 21-day SMAs, respectively.

Spot stayed apathetic after the US private sector created 135K jobs during last month, a tad below the 140K jobs initially forecasted.

Further out, EUR/USD is deriving extra support from the shrinking yield spread differential between the US and German bonds, taking the gap to 217 pts. The recent poor print from the US ISM manufacturing continues to weigh on sentiment and keeps yields under extra downside pressure.

Moving forward, global assets are expected to remain sidelined amidst the usual pre-Payrolls lull. Additional relevant data will come in earlier with the ISM Non-manufacturing and Factory Orders, while Chief Powell will close the weekly calendar on Friday evening.

What to look for around EUR

EUR dropped to new 2-year lows vs. the Greenback in the 1.0880/75 band earlier in the week, as investors’ sentiment remains sour and without any hint of getting any better, at least in the near/medium term. In fact, the slowdown in the euro area stays far from abated and carries the potential to deteriorate further, as per the latest PMIs in core Euroland and despite the lacklustre improvement in a couple of German sentiment gauges. Speaking of Germany, the likeliness that the country could slip back into recession in the third quarter just adds to the already gloomy panorama for the bloc and weighs further on the single currency. The unremitting slowdown in the region does nothing but justify the ‘looser for longer’ monetary stance by the ECB. On another front, potential US tariffs on imports of EU cars remain well on the table, while the Brexit limbo and UK politics adds to the ongoing concerns.

EUR/USD levels to watch

At the moment, the pair is gaining 0.05% at 1.0937 and faces the next hurdle at 1.1002 (21-day SMA) followed by 1.1109 (monthly high Sep.13) and finally 1.1163 (high Aug.26). On the downside, a breach of 1.0879 (2019 low Oct.1) would target 1.0839 (monthly low May 11 2017) en route to 1.0569 (monthly low Apr.10 2017).