Key points from the Eurozone PMI:
euro zone S&P Global Manufacturing PMI Flash (AUG)49.7 vs Julyy 49.8. 26 months leave.euro zone S&P Global Services PMI Flash (AUG)50.2 vs Julyy 51.2. Down in 17 months.EURUSD remains weak.
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Tseasonally adjusted S&P Global Eurozone PMIThe composite manufacturing index fell to 49.2 in August from 49.9 in July, according to the “flash” reading. The index pointed to a second consecutive reduction in business activity in the eurozone after a 16-month period of growth. Although still mild, the latest drop was steeper than the one recorded in July.
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The outlook for the rest of the year from the Eurozone remains bleak as rising prices mean discretionary spending is being diverted to essentials such as food, supplies., and repayment of loans. Cost of living pressures means that the service sector’s recovery after the lifting of pandemic restrictions has slowed, while manufacturing remained in contraction in August. Output is now falling across a range of sectors, from basic materials and auto companies to tourism and real estate firms as economic weakness becomes more widespread..
The euro remains under pressure and has again broken parity against the dollar, which raises the question”will We see one more hawk European Central Bank (ECB) this week?” The market is pricing in a 54bp rate hike for the September 8 meeting. Could the ECB start discussing the prospect of more aggressive rate hikes if it wants to offer? the EUR/USD any support? Seconds The head of the Bundesbank, Joachim Nagel, “Given the high inflation, new increases in interest rates must follow,tThe last few months have shown that we have to decide the monetary policy from one meeting to another.” The head of the Bundesbank will attend the Federal Reserve Jackson Hole Economic Symposium that should provide guidance on the Federal Reserve’s next move.
EURUSD 1H graphic
Source: TradingViewprepared by Zain Vawda
From breaking parity yesterday, we a new annual low was printed with further declines ahead of the PMI release. A soft reaction after the PMI release has the pair trading around 0.9927, an odd 20 pips below previous YTD lows around 0.9952. If the dollar offers persist today, we could very well go lower and test the 0.9850-0.9800 zone as pressure on the euro remains strong.
Key intraday levels worth watching:
Zones of resistance
— Written by Zain Vawda for DailyFX.com
Contact and follow Zain on Twitter: @zvawda