Key points:
The euro fell to $1.11 as concerns over the Eurozone economy after disappointing Purchasing Managers’ Index (PMI) readings. These flash PMIs for August revealed that private sector activity in the Eurozone, particularly in Germany and France, has contracted.
Picture: EURUSD falls to $1.11 after weak Eurozone PMIs, as observed on the VT Markets app.
On a more immediate basis, EURUSD has seen a slight recovery towards 1.1143 after dipping to 1.1083, driven by concerns over economic performance in key Eurozone sectors. The French services sector has struggled following the Olympics, while Germany’s manufacturing output continues to face downward pressure, particularly in the automotive industry, with notable weakness in companies like Volkswagen.
Technically, the pair found support at 1.1083, and we have seen a rebound with the MACD showing a shift towards bullish momentum. The price has also crossed above the 24-period EMA, suggesting continued upside pressure.
If EURUSD can break above 1.1150, we could see a continuation towards higher levels, but traders will remain cautious given the broader economic challenges in the Eurozone. A break below 1.1100 could indicate a retest of the support level.
The disappointing data has triggered concerns that the European Central Bank (ECB) may need to accelerate monetary easing. The central bank has already cut rates twice this year, most recently by 25 basis points in September.
This dovish stance comes in response to sluggish inflation and waning growth across the region. Investors now predict that further cuts are imminent, with market pricing indicating growing odds of a reduction as early as October.
Related topic: Interest rate tug-of-war for central banks
For short-term traders, the outlook for the EURUSD currency pair remains bearish as the pair continues to respond to weak economic data and heightened expectations for more ECB rate cuts.
A potential rebound could occur if there is a significant change in the upcoming inflation reports or a shift in ECB communications. However, near-term support lies around $1.10, and any sustained break below this level could open the door for further downside in the weeks ahead.
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