EUR/USD and a Slide to $1.0750 in the Hands of Manufacturing PMIs

It is a busy day ahead for the EUR/USD. Manufacturing PMI numbers from Italy and Spain and finalized PMIs for France, Germany, and the Eurozone will draw interest.

Italy and the Eurozone PMIs will likely have the most impact, barring a downward revision to the German manufacturing PMI. Economists forecast the Italian manufacturing PMI to fall from 52.0 to 51.0 in March.

With the manufacturing PMIs in focus, investors should also consider ECB member speeches. However, no ECB Executive Board members are due to speak today, leaving chatter with the media to influence.

Earlier today, disappointing PMI numbers from China set the mood. The Caixin Manufacturing PMI fell from 51.6 to 50.0. Economists forecast an increase to 51.7.

A surge in crude oil prices, fueled by an unexpected OPEC decision to cut output, added to the bearish mood. The jump in crude oil prices could undo the work of central banks to bring inflation to target.

EUR/USD Price Action

This morning, the EUR/USD was down 0.46% to $1.07922. A bearish start to the day saw the EUR/USD fall from an early high of $1.08440 to a low of $1.07904. The EUR/USD fell through the First Major Support Level (S1) at $1.0811.

Technical Indicators

The EUR/USD needs to move through S1 and the $1.0868 pivot to target the First Major Resistance Level (R1) at $1.0900 and the Friday high of $1.09257. A return to $1.09 would signal a bullish session. However, the EUR/USD needs hawkish ECB chatter and hotter-than-expected PMI numbers to support a pre-US session breakout.

In the case of an extended rally, the bulls will likely test the Second Major Resistance Level (R2) at $1.0955. The Third Major Resistance Level (R3) sits at $1.1046.

Failure to move through S1 and the pivot would leave the Second Major Support Level (S2) at $1.0779 in play. However, barring a data-fueled sell-off, the EUR/USD pair should avoid sub-$1.075 and the Third Major Support Level (S3) at $1.0690.

Looking at the EMAs and the 4-hourly chart, the EMAs send mixed signals. The EUR/USD sits above the 100-day EMA ($1.07222). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA widened from the 200-day EMA, delivering mixed signals.

A move through S1 ($1.0811) and the 50-day EMA ($1.08198) would support a breakout from R1 ($1.0900) to give the bulls a run at R2 ($1.0957). However, failure to move through S1 ($1.0811) and the 50-day EMA ($1.08198) would leave S2 ($1.0779) in play. A move through the 50-day EMA would send a bullish signal.

The US Session

Looking ahead to the US session, it is a relatively quiet day on the US economic calendar. The US manufacturing sector will be in focus, with the ISM Manufacturing PMI and sub-components likely to have more influence on the EUR/USD.

Investors should also monitor Fed chatter on monetary policy and the US economy.