EUR/USD recovery gains momentum, taps 1.1200 handle

The EUR/USD pair's recovery from two-month lows gained momentum following disappointment from the US monthly jobs report and the pair has now turned higher to move back above the very important 200-day SMA.

Currently hovering just below 1.1200 handle, the pair is benefitting from a broad based US Dollar weakness after headline NFP print showed the US economy added 156K new jobs in September, far less-than 175K expected and the smallest gain in four months. The unemployment rate also ticked higher to 5.0%, while average hourly earnings matched market expectations and came-in to show a monthly growth of 0.2%. 

Despite of the said disappointment, CME group's FedWatch Tool is still pointing to around 60.0% probability of Fed rate-hike action in December clearly suggesting that market remains convinced that the Fed would eventually move to raise interest rates by the end of this year. 

However, the current price action is not reflecting the expectations and hence, raises skepticism over sustainability of the ongoing bullish recovery momentum. 

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "The short term picture for the pair is modestly bullish, given that it's trading above a bearish 20 SMA in the hourly chart, while technical indicators turned higher, aiming now to extend beyond their mid-lines. In the 4 hours chart, technical readings maintain the risk towards the downside, as the spike stalled below a bearish 20 SMA, while technical indicators bounce modestly from near oversold readings. Still, only a break below 1.1090 will favor a bearish continuation, with the pair pointing then to end the week close to the 1.1000 level."

"Support levels: 1.1120 1.1080 1.1045
Resistance levels: 1.1160 1.1200 1.1245"