EURUSD falls for the second consecutive day, reaching a nearly two-week low.
The EURUSD pair extends its current corrective decline from the mid-1.0900s, or a four-month high reached last week, and is under selling pressure for the second consecutive day on Wednesday. This is also the fourth day of a negative move in the previous five, dragging spot prices to a roughly two-week low near the 1.0840 level during the Asian session.
The ECB’s dovish stance continues to erode the Euro and exert some pressure.
The shared currency weakened by The European Central Bank’s (ECB) pessimistic view of the Eurozone’s economic outlook, along with forecasts that inflation would continue to decrease, left the door wide open for a rate drop in September. In contrast, the US Dollar (USD) has risen to its highest level since July 11 due to an increase in US Treasury bond yields. Aside from that, a softer risk tone helps the Greenback’s relative safe-haven status and contributes to the offered tone around the EURUSD pair.
September Fed rate drop bets cap the USD and should provide support ahead of the flash PMIs.
Meanwhile, markets appear to believe that the Federal Reserve (Fed) will drop borrowing prices in September and have priced in the prospect of two more rate cuts by the end of the year. This, in turn, may operate as a headwind for US bond yields and the Greenback. Furthermore, traders may unwind the ‘Trump trade’ if it becomes increasingly likely that US Vice President Kamala Harris would win the Democratic nomination. This could contribute to restricting the USD’s upside and provide some support for the EURUSD pair.
Traders may also want to stay on the sidelines ahead of this week’s significant US macro data, including the Advance Q2 GDP report on Thursday and the Personal Consumption Expenditures (PCE) Price Index data. Meanwhile, the flash Eurozone/US PMIs expected to provide short-term trade opportunities later this Wednesday. However, the aforementioned mixed fundamental background calls for caution before putting aggressive bearish trades on the EUR/USD pair and positioning for more losses.
Economic Indicator: HCOB Composite PMI.
The HCOB issue the PMI on a monthly basis, which is a leading indicator of private-business activity in the Eurozone’s manufacturing and services sectors. The data is gathered from polls of senior executives. Each response weighted based on the company’s size and contribution to overall manufacturing or services production, as determined by the sub-sector to which it belongs. Survey results represent any change in the current month compared to the previous month and can predict shifting trends in official data series such as GDP, industrial production, employment, and inflation. The index ranges from 0 to 100, with values of 50.0 indicating no change over the preceding month a number above 50 suggests that the private economy is generally expanding, which is a positive indicator for the Euro (EURUSD). Meanwhile, a number below 50 indicate that activity generally dropping. Which is considered negative for EUR.
