- The Euro is expected to experience a slight decline on Tuesday as its debt re-enters the market.
- Long-term yields in France have surged to their highest levels since 2009, driven by a politically uncertain environment.
- Later, data on Eurozone services PMI may lend some momentum to the Euro.
The EUR/USD exchange rate has been dropping for the second consecutive day, currently at 1.1620. Renewed worries regarding fiscal deficits in significant economies have triggered bond market sell-offs, nudging investors toward safer assets like the US dollar and gold.
Over the last three days, Germany’s 30-year yields have jumped over 10 basis points. Meanwhile, France’s long-term yields have reached levels not seen since 2009, despite having eased in August, reflecting the nation’s political instability.
The US dollar has found footing amid this risk-averse sentiment, bolstered by positive US ISM Manufacturing PMI data, which indicated continuous sector activity for six straight months in August.
Even if there are signs of easing risk aversion, market sentiment remains quite pessimistic on Wednesday. In Europe, the August HCOB Service PMI will be a critical data release, while US Factory Orders and Joltz Jobs data are also expected to provide essential insights for the dollar.
Daily Digest Market Movers: Eurozone Debt Fears Offering Investors’ Hopes to Cut Fed Rate
- Concerns over fiscal imprudence in major economies are resurfacing, prompting global government bond sales. Expectations for a potential cut in the Fed’s rates have taken a backseat, while the US dollar benefits from its status as a safe haven.
- US ISM Manufacturing PMI has risen from 48.0 in July to 48.7 in August, which, nevertheless, fell short of the anticipated 49.0.
- Earlier, the S&P Global Manufacturing PMI recorded a modest increase to 53 from 53.3 in July, although it pointed to issues with pricing and supply stemming from trade tariffs.
- Wednesday’s economic calendar highlights service activities. Eurozone HCOB Service PMI is expected to confirm a preliminary estimate of 50.7 for August.
- In the US, July factory orders are predicted to contract by 1.4% following a 4.8% drop in June, illustrating the impact of tariffs on industrial activity.
- Job openings in the US, as reported by Joltz, are likely to remain consistent at around 7.4 million in August, compared to 7.437 million in July.
Technical Analysis: EUR/USD
The EUR/USD pair is currently under stress after failing to break past 1.1740 on Monday. Broadly speaking, it seems to be moving within a considerable range of 150 pips, reflecting significant price activity throughout August.
It appears to be finding support near the monthly range’s lower end, between 1.1575 and 1.1590, with lows around 1.1615 seen on Tuesday.
On the flip side, a level around 1.1680 may act as resistance ahead of the downward trend resistance formed by the peaks on August 13th and 22nd and the height from September 1st.
