The EUR/USD pair is experiencing a bit of turbulence, shifting to around 1.1515 just before US trading began, after dipping below the 1.1500 mark the day prior. Recent weak data from the Eurozone and Germany, particularly the HCOB Purchasing Managers’ Index (PMI), complicated what was a delicate recovery for the euro as markets awaited preliminary PMI figures and consumer sentiment insights from the US.
Manufacturing PMI for the Eurozone actually dropped to 50.2, compared to October’s 50.0, and fell further to 49.7 in November, which was unexpected. Meanwhile, the Services PMI slipped to 52.4, missing the anticipated steady reading of 52.5.
In Germany, the manufacturing sector didn’t fare any better, as its PMI fell to 48.4 from 49.6 in October, indicating further contraction. The services PMI also fell, from 54.6 to 52.7, falling short of market predictions of 53.9.
On the other hand, the US dollar has been holding its ground this week, with investors accepting that any potential monetary easing from the Federal Reserve may take a while. The October minutes from the Federal Open Market Committee (FOMC) showed significant divisions among policymakers, and the much-anticipated September nonfarm payrolls report didn’t clarify what to expect from December’s Fed meeting.
Today, officials from the European Central Bank, including Luis de Guindos, Joachim Nagel, and José Luis Escriva, are set to share their insights. In the US, the S&P Global PMI, along with the Michigan Consumer Confidence Index, are expected to influence the dollar’s performance.
A daily digest that moves the markets: Euro recovery loses momentum
- The downside potential for the U.S. dollar seems limited as expectations for a December Fed rate cut are dialed back. The euro’s recovery attempts, however, are hindered by disappointing business activity metrics from both Germany and the Eurozone.
- Earlier, ECB President Christine Lagarde mentioned that a strong euro might have a more profound impact on inflation than anticipated, emphasizing that the ECB is prepared to adjust its monetary strategy if needed.
- In the US, November’s S&P Global Manufacturing PMI is projected to decrease to 52.0 from 52.5 in October, while the Services PMI is expected to hold steady at 54.8.
- The Michigan Consumer Confidence Index is anticipated to show a slight rise to 50.5 in November from 50.3 previously. Consumers’ inflation outlook remains unchanged from October at 4.7% for the next year and 3.6% over five years.
- The latest non-farm employment report revealed a net gain of 119,000 jobs in September, outperforming expectations, but the unemployment rate unexpectedly increased to 4.4% from 4.3%, somewhat dampening enthusiasm over the figures.
- In the Eurozone, the European Commission’s consumer confidence index for November remained steady at -14.2, contrary to predictions for an uptick to -14.0.
Technical analysis: EUR/USD remains vulnerable below 1.1550
Support for EUR/USD is seen at the psychological threshold of 1.1500, with any gains beyond 1.1550 appearing unlikely, which raises concerns of further declines. While technical indicators on the 4-hour chart are inching upwards, the Relative Strength Index (RSI) is still below the crucial 50 level, suggesting that the recovery attempts may not hold.
For the pair to gain momentum, it needs to break above Thursday’s peak at 1.1550, aiming for the upper limit of the descending channel identified from November 18th and 19th, close to 1.1600, or the mid-October highs near 1.1625.
However, if it fails to break the 1.1550 barrier, it could embolden sellers to push the pair back towards 1.1500, focusing on the November 5 lows around 1.1470 and the channel support near 1.1425.
