EUR/USD Bears to Target Sub-$1.09 on Private Sector PMIs

Highlights

• The EUR/USD took an early fall this morning, with concerns over the economic outlook weighing.
• Prelim private sector PMIs from France, Germany, and for the Eurozone could deliver further EUR/USD losses.
• However, the US services PMI and Fed chatter will likely be the key drivers today.

It is a busy Friday for the EUR/USD. Prelim private sector PMIs for France, Germany, and the Eurozone will be in focus today.

After a series of weak economic indicators and market jitters over the Chinese economy, today’s PMIs will give the markets a sense of what to expect going into Q3.

Economists expect a bearish set of numbers from France and Germany. As a result, economists forecast the Eurozone manufacturing PMI to fall from 44.8 to 44.5 and the services PMI to fall from 55.1 to 54.5.

With the ECB set to deliver a July interest rate hike, investors should look beyond the headline PMIs. New orders and inflation will be focal points. Softer input and output price inflation could ease bets on a post-summer interest rate hike.

However, a more marked contraction across the manufacturing sector and slower service sector activity would fuel recessionary jitters.

With a busy economic calendar, investors should monitor ECB commentary throughout the day. ECB Executive Board Members Fabio Panetta and Luis de Guindos are on the calendar to speak today. Investors should consider beyond July policy chatter that would move the dial.

EUR/USD Price Action

This morning, the EUR/USD was down 0.16% to $1.09385. A mixed start to the day saw the EUR/USD rise to an early high of $1.09592 before falling to a low of $1.09320.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The EUR/USD sits above the 50-day EMA ($1.09021). The 50-day EMA pulled further away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA ($1.9021) would support a breakout from R1 ($1.0996) to give the bulls a run at R2 ($1.1036) and $1.1050.

However, a fall through S1 ($1.0932) would bring S2 ($1.0908) and the 50-day EMA ($1.09021) into play. A fall through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

The US Session

Looking ahead to the US session, it is a busy day on the US economic calendar.

Prelim US private sector PMIs will also move the dial. We expect the services PMI to garner greater interest. However, investors should look beyond the headline figures, with employment, new orders, and inflation as the focal points.

Beyond the numbers, FOMC members will also need monitoring. FOMC members Bullard and Bostic are on the calendar to speak today.

After Fed Chair Powell’s two days of testimony, there was little change in Fed rate hike bets.

According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 76.9% on Thursday versus 74.4% on Wednesday. The chances of the Fed lifting the Fed Funds Rate to 5.75% in September increased from 11.9% to 13.8%.