EUR/USD Daily Forecast – Euro Manufacturing PMI Slides to 7.5 Year Low

EUR/USD appears to be on the verge of a bearish shift as it attempts to cross below an important support area. The pair declined just over 1% at one point yesterday before late-day buyers triggered a rally to erase a bulk of the losses.

The recovery rally was not sustained, however, as the currency pair is seen once again attacking fresh weekly lows.

Economic data from Europe weakened and weighed on the single currency. Purchase manager survey data for the manufacturing industry showed the euro zone contracting for a fourteenth straight month. The PMI index declined to a seven and a half year low as Coronavirus fears continued to dominate.

PMI readings for Ireland, France, and Spain declined to multi-year lows while the Netherlands was the only country that did not fall into a contraction with an index reading of 50.

The unemployment rate in Italy improved to 9.7% which was ahead of analyst expectations. However, the report released today reflects data from February and it is widely expected that Italy’s job market has deteriorated significantly since then as a result of the virus.

Later in the day, manufacturing PMI figures for the US will be released which are also expected to point to a contraction in the industry.

Technical Analysis

EUR/USD is at an interesting inflection point as it attempts to break down below the psychological 1.1000 price point as well as the 200-day moving average.

It did so yesterday, only to recover back above the critical support area late in the day. In early trading today, the pair is once again seen attempting to cross lower.

The first level of support is found at 1.0927 which ended up holding the pair higher yesterday. Beyond that, the next level of downside interest falls at 1.0888.

To the upside, bears will want to cap rally attempts at 1.1000 in the session ahead.

Bottom Line

• EUR/USD has fallen back below the 1.1000 handle in the early day on Wednesday, weighed by weak manufacturing data out of Europe.
• US manufacturing figures will be released later in the day along with the latest ADP jobs report.