EUR/USD Eyes a Slide to $0.9580 as the Pound Hits Reverse

For the EUR, it was a busy morning. Eurozone and member state services, composite PMIs, and Eurozone investor sentiment figures drew interest. Eurozone retail sales figures will also be in focus shortly.

In August, the Eurozone’s services PMI fell from 51.2 to 49.8 (17-month low) versus a prelim 50.2. As a result, the composite PMI declined from 49.9 to 48.9 (18-month low) versus a prelim 49.2.

According to the finalized August survey,

• While employment continued to rise across the private sector, albeit at a slower pace, new orders fell at a more marked pace.
• Importantly, both input and output price pressures eased.
• By member state, Germany ranked last with a 27-month low composite PMI of 46.9.
• In Italy, the composite PMI rose to a two-month high of 49.6.
• Ireland (51.0), Spain (50.5), and France (50.4) all recorded private sector growth despite Ireland and France seeing composite PMIs fall to 18-month and 17-month lows, respectively.

While the PMI numbers weighed on the EUR, investor confidence and retail sales figures delivered mixed results.

In September, the Sentix Investor Confidence Index declined from -25.2 to -31.8 versus a forecasted decline to -27.5. The fall aligned with broader market sentiment towards the Eurozone economic outlook and a Eurozone recession.

EUR/USD Price Action

At the time of writing, the EUR was down 0.44% to $0.99078. A choppy start to the day saw the EUR slide to an early low of $0.98775 before striking a high of $0.99371. The EUR fell through the First Major Support Level (S1) at $0.9918 to test the Second Major Support Level (S2) at $0.9884 before returning to $0.99.

Technical Indicators

The EUR/USD needs to move through R1 and the $0.9976 pivot to target the First Major Resistance Level (R1) at $1.0010

While today’s stats are unlikely to material influence the ECB’s policy decision on Thursday, weak numbers highlighted the Eurozone’s economic woes.

In the event of an extended rally, the EUR/USD pair could test the Second Major Resistance Level (R2) at $1.0067 and resistance at $1.0100.

The Third Major Resistance Level (R3) sits at $1.0159

Failure to move through R1 and the pivot would see the EUR/USD retest the Second Major Support Level (S2) at $0.9884.

However, barring a market flight to safety, the EUR/USD should steer clear of sub-$0.9850 and the Third Major Support Level (S3) at $0.9793.

The Third Major Support Level (S3) sits at $0.9793.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 50-day EMA, currently at $0.99931. The 50-day EMA eased back from the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA to deliver bullish signals.

A EUR/USD move through the 50-day EMA ($0.99931) and R1 ($1.0010) would give the bulls a run at the 100-day EMA ($1.00391) and R2 ($1.0067).

However, a further pullback from the EMAs would leave the Major Support Levels in play.

GBP/USD Price Action

At the time of writing, the Pound was down 0.18% to $1.14862. A mixed start to the day saw the Pound rise to an early high of $1.14959 before falling to a low of $1.14434. The Pound briefly fell through the First Major Support Level (S1) at $1.1472.

UK stats this morning tested Pound support. In August, the services PMI fell from 52.6 to 50.9 versus a prelim 52.5. As a result, the composite PMI fell from 52.1 to 49.6 versus a prelim 50.9.

Technical Indicators

The Pound needs to move through the $1.1530 pivot to target the First Major Resistance Level (R1) at $1.1565 and the Friday high of $1.15886.

A pickup in market risk appetite and any hawkish BoE chatter would support a return to $1.16 to target the Second Major Resistance Level (R2) at $1.1623.

The Third Major Resistance Level (R3) sits at $1.1717.

Failure to move through the pivot would see the Pound retest the First Major Support Level (S1) at $1.1472 and support at $1.1450. In the event of an extended pullback, the GBP/USD pair would likely test support at $1.1437 and support at $1.14.

The Third Major Support Level (S3) sits at $1.1344.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.16624.

The 50-day pulled back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals. A further 50-day EMA pullback from the 100-day EMA would leave the support levels in play.

However, a GBP/USD move through R1 (1.1565) would give the bulls a run at R2 ($1.1623) and the 50-day EMA ($1.16624).

The US Session

It is a quiet day ahead, with the US markets closed for Labor Day. A lack of stats leaves the EUR/USD and GBP/USD pair in the hands of any FOMC member chatter. Recent chatter has nudged the Dollar Spot Index (DXY) towards 110.