EURUSD extends pullback on weaker than expected EU / German manufacturing PMI’s
EURUSD remains in red for the fifth straight day and accelerated lower on Monday morning, as weaker than expected German / EU manufacturing PMI data (hit the lowest in three years in July) further soured the sentiment.
Downbeat PMI numbers hurt expectations for rate hike in September, as the Fed is expected to raise rates by 25 basis points in the policy meeting due later this week.
Although inflation in the Eurozone dropped significantly (down to 5.5% in June from last October’s peak at 10.6%) it is still well above 2% target and requires further action from the central bank, but high borrowing cost already hurt the economy, warning of further slowdown in economic growth if the ECB opts for more aggressive approach to monetary policy.
Today’s break of pivotal supports at 1.1106/00 (Fibo 38.2% of 1.0833/1.1275 / round-figure) generated fresh bearish signal for attack at next key support at 1.1054 (50% retracement / daily Kijun-sen).
Bears may face solid bids at this zone, as stochastic is deeply oversold and bullish momentum is still strong on daily chart but break here would risk test of 1.1026/1.1000 (Fibo 61.8% / psychological) violation of which to confirm reversal.
Only bounce and close above 10DMA (1.1150) would neutralize bears and signal an end of corrective phase.
Res: 1.1106; 1.1150; 1.1171; 1.1229
Sup: 1.1054; 1.1026; 1.1000; 1.0938