DEBIT POINTS AND EUR/USD ANALYSIS
German PMI is a cause for concern for the eurozone. ECB under pressure to revise rate forecasts. 1.10 close for bears.
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FUNDAMENTAL CONTEXT OF THE EURO
The euro’s recent struggles worsened this morning after German HCOB PMI data (see economic calendar below) missed on all fronts, with manufacturing contracting even higher, while services (the country’s biggest contributor to GDP) fell to 52 but remaining within the expansive territory. With Germany being the largest economy in the Eurozone, it serves as a proxy for the region and with similar figures reflected by the French release, the EZ data to come is likely to echo this sentiment. Some important comments from the report include (Source: S&P Global):
“New services businesses fall for first time in six months.” “There is a greater likelihood that the economy will be in recession in the second half of the year.” “The composite index moved into contraction territory below 50 for the first time since January.” “The pace of employment growth in the German private sector slowed sharply in July.”
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ECONOMIC CALENDAR EUR/USD (GMT +02:00)
Source: DailyFX Economic Calendar
The next decision by the European Central Bank (ECB) on interest rates this week will have to take into account these data and the rapid slowdown in economic data. Although I do not expect a change in current market prices (see table below) that favors a 25 bps walk with almost 100% Certainly, further guidance from then on may begin on a peaceful trajectory that could further expose the euro.
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PROBABILITY OF INTEREST RATES FROM THE EUROPEAN CENTRAL BANK
Source: Refinitiv
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
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The EUR/USD daily price action has maintained its bearish course now below the 1.1096/1.1100 zone ahead of the long-awaited ECB rate decision. With more scope for a favorable re-rating from the ECB relative to the Fed, the pair could extend its downside towards the 1,1000 psychological support management.
Resistance levels:
Support levels:
IG CUSTOMER SENTIMENT DATA: BASSIST
IGCS shows that retail traders are currently SHORT in EUR/USD, with 65% of traders currently holding short positions (as of this writing). At DailyFX we normally take a contrary view to the crowd sentiment, but due to recent changes in long and short positioning we come to a bearish bias in the short term.
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