EUR/USD leading the pack, median reversion capped, its got to be down from here, surely? 21-D SMA is the initial target

• EUR/USD traders have taken profits with US markets closed for labour day and the price is being driven back to the upside with a target on the median of the previous day's candle which is around 1.1630. The high so far has been 1.1628.
• The question is now, whether this is time to re-enter short EUR/USD with a target to 21-D SMA?

EUR/USD dropped from 1.1718 on fundamental headlines last week after strong bullish reversal trend of 9/10 bullish daily sticks. The one bearish stick, a piercing line, failed to make a lower low below the prior day and bulls bought back in and in droves. Zooming out, 1.1538 has been a key area of support for the end of 2017 and in recent weeks. It was also an area of resistance back in 2015. Today, its where the 21-D SMA is located, in the middle of the daily Bollinger bands. It is a target for the downside once the pair gathers bearish momentum again - or rather IF the pair gathers bearish momentum again. 

EZ data caps median reversion rally

In terms of data, the US is closed but European markets showed a miss in the manufacturing numbers which were monitored to reflected how trade wars might be impacting the EZ sector.  German final manufacturing PMI came in at 55.9 vs 56.1 and the EMU’s gauge at 54.6 (in-line) for the month of August. EUR/USD dropped from 1.1626 median reversion highs back to 1.1598.

USD benefits to a greater extent than the EUR from the EM outflow

Fundamentally, it makes sense to be short EUR/USD. Traders pick up the carry long dollar, short euro. The greenback is being treated as a safe haven and investors are looking for yield - Elsewhere, the hunt for yield is risky with emerging markets awash with contagion risk - Turkey and Italian risk, (credit rating Fitch revised lower its outlook on Italy to negative from stable over the weekend), is not going to be swept under the carpet, or each time that it is, the carpet is pulled back and all is revealed:  

"For some EM currencies the higher cost of USD funding has arguably been the biggest driver of capital back to the USD," analysts at Rabobank explained, "How high US rates are likely to extend over the next 12 months or so will be key in determining the full extent of the pain in EM. In the near-term, the likelihood that the Fed will hike rates again in the next few weeks". 

Trade tensions have escalated with Trump looking to impose more tariffs on China this week - 6th Sep they might just kick in (to overshadow nonfarm payrolls perhaps?). At the same time, there are difficult negotiations with Canada it seems as well while tensions with Europe simmer in the background - the market wants to be long of the dollar on all of the above risks that are in play.  However, 2019 might be a turning point on the interest rate side as the ECB looks set on hiking rates in the second half of the year while the market is expecting notably fewer Fed rate hikes in 2019 relative to 2018. Fundamentally, it makes sense that the pair should stay mainly offered bar some expected median reversion (pull backs), such as what has been seen in trade at the start of this week. 

EUR/USD levels

The 21-D SMA is first key target located at a familiar line of support and resistance - a break of 1.1580 (prior lower low) would open the case for that target. Beyond there, the weekly 100 SMA is located at 1.1474. " We a forecasting a move to EUR/USD1.13 on a 6 to 9 month view," analysts, who area bearish EUR/USD, have called.