Piece written by Alexa Smith, Trive Financial Market Analyst
Europe’s headline inflation soothed, and GDP growth exceeded expectations on Monday, bolstering the EURUSD currency pair. However, a declining HCOB Manufacturing PMI from 43.4 to 42.7 and a slow economic recovery, in general, did little to ease recessionary concerns.
Meanwhile, the Greenback is facing scrutiny due to a slew of macroeconomic data. The S&P Manufacturing PMI met expectations by increasing from 46.3 to 49, while the ISM Manufacturing PMI fell short of predictions, rising by a mere 0.4 from 46 to 46.4. Though the US Manufacturing PMIs still indicate a contracting economy, the modest increases contrasted with Europe’s concerning data. Additionally, the United States’ security downgrade from AAA to AA+ did little to deter the Greenback from making further gains as the currency pair flattened after trickling higher. Now, the focus shifts to services and labour market data, which could threaten the Greenback’s uptrend or see the Euro continue down a slippery slope.
The EURUSD uptrend was halted by a strong Greenback. After a bullish breakout from the 1.10317 support, the currency pair faced contention at the 50-day moving average, leading to a pullback towards the 1.09566 support. A potential upward move from this level could target the 1.10317 resistance at the 23.60% Fibonacci level, which could act as a pivot towards the 1.11533 resistance at the Golden Ratio.
However, the price action has stalled at the swing high, suggesting a possible pullback to the 1.09566 support. If a breakdown of this support occurs, the 1.08423 major support could become a pivotal point for further downward momentum.
The EURUSD currency pair is in the midst of a downward trend which could mark the 1.08423 major support as a point of interest if a breakdown of the 1.09566 support occurs. However, the slight leg up could encourage a breakout from the 1.10317 resistance, which could pave the way towards the 1.12748 major resistance.
Sources: TradingView, Reuters