The EUR/USD currency pair began to slide after a mixed bag of economic data hit the wires out of the eurozone, but managed to print at 1.1176 dollars per euro at the close on Wednesday, down just 0.65% from the previous close. The European statistics agency Eurostat said that the eurozone consumer price index (CPI) fell 0.1% in September from a year earlier, compared to expectations for a flat reading, following a 0.1% increase in August. The Core CPI, which excludes food, energy, alcohol, and tobacco costs, increased by a seasonally adjusted 0.9% in September, in line with the forecasts and unchanged from August.

European Central Bank (ECB) President Mario Draghi said last Wednesday at the ECB meeting in Frankfurt, that the bank is prepared to beef up its bond-buying program if inflation weakens more than currently expected. Mr. Draghi also said that “if needed,” the program could “go beyond” September 2016.

The dollar continued to strengthen against the euro on Wednesday, after payroll processor ADP reported that U.S. private sector employment added 200,000 new jobs in September, beating economists' expectations of a 190,000 increase. The August number, however, was revised down by 4,000 jobs to 186,000. ADP also said that manufacturing jobs were weak. The U.S. nonfarm payrolls report will be released by the Labor Department on Friday. Wall Street economists' expectations are for a 203,000 gain.

Separately on Wednesday, the Chicago PMI came in at 48.7 for September, from 54.4 last month, missing economists' expectations of 52.7. Some traders said the U.S. nonfarm payrolls data on Friday could help strengthen, or weaken, the case for the Federal Reserve raising U.S. interest rates before the end of the year, thus setting the tone for the dollar.

The federal funds futures, commonly used to estimate the market’s views on the likelihood of changes in U.S. monetary policy, indicate only 14% odds for a quarter-point rate hike at the October 28 policy meeting, while the odds are 41% at the December 2015 meeting, according to data from CME Group as of September 30.

The federal funds futures, commonly used to estimate the market’s views on the likelihood of changes in U.S. monetary policy, indicate only 14% odds for a quarter-point rate hike at the October 28 policy meeting, while the odds are 41% at the December 2015 meeting, according to data from CME Group as of September 30.

Wall Street analysts are debating what direction the EUR/USD should be heading next. Nomura Holdings Inc. has become less bullish on the dollar and changed its estimate for EUR/USD to 1.10 dollars per euro by year-end and 1.06 dollars per euro by June, from a previous call of 1.05 dollars per euro, according to Bloomberg. Barclays, on the other hand, now predicts 0.98 dollar per euro by the end of 2015 and 0.93 dollar per euro by mid-2016, from 1 dollar per euro and 0.95 dollar per euro, respectively.

As of September 22, there are 90,489 short positions of euro FX (CME:6E), traded on the Chicago Mercantile Exchange (CME), by leveraged funds, a week-over-week decrease of 2,817 short positions. This is compared to about 34,018 long positions, up 353 from the previous week, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) each Friday. Since September 1, hedge funds have increased their net short positions about 9,539 contracts, where euro FX contracts are traded in units of 125,000 euros.

Technically, the EUR/USD currency pair broke out the symmetrical triangle chart pattern as the yuan devaluation by the People’s Bank of China caught the hedge funds by surprise in mid-August. The EUR/USD was unable to stay above the 1.14 dollars per euro level and pulled back to the moving averages. 

The currency pair is now trading near the short-term key technical resistance/support at 1.12 dollars per euro, or the 61.8% Fibonacci retracement level. The EUR/USD could head back upward and retest the 1.14 dollars per euro level, as the likelihood of the Federal Reserve raising the rate at the October 28 meeting is slim at best. The dollar could receive a temporary boost if nonfarm payrolls comes in above expectations.