Euro continues to fall against the US Dollar, with the EURUSD falling to three-month lows of 1.0740.
The Euro (EUR) continues to fall against the US Dollar (USD), bringing EURUSD to new three-month lows at 1.0740 on Tuesday. The resumption of selling pressure surrounding the pair looks to be supported by weaker-than-expected economic data. Services by CaixinChina’s PMI figures, which indicate a slowing in the country’s services sector, did not support the single currency, nor did domestic final readings from the same sector.
Investors’ preference for safe-haven assets supports the US dollar early in the European morning. Propelling the USD Index (DXY) to record highs around 104.60 despite the fact. That US and German bond rates remain uncertain.
Meanwhile, the market remains optimistic about the Federal Reserve’s (Fed) decision to pause. Its interest rate raise campaign for the rest of the year. Furthermore, speculation has begun to circulate. That interest rate reduction may not occur until March 2024.
On the other hand, the European Central Bank (ECB) is navigating a difficult situation. A environment of increased uncertainty surrounds the possible path of interest rates beyond the summer months. Market debates concentrate around the idea of stagflation. Which adds to the general sense of uncertainty.
Speeches by ECB Board members Eduardo Fernandez-Bollo. Isabel Schnabel, and Luis De Guindos are also on the agenda for Tuesday.
Market movers for the day: The euro is under more pressure due to weak statistics.
On Tuesday, the EUR faces more headwinds versus the USD.
Caixin Services/Composite PMIs in China fell in August.
The European Services sector PMIs have returned to contraction zone.
The Fed’s deadlock is bolstered by disinflation and weaknesses in the US labor market.
Investors believe the Fed will decrease rates in the second quarter of 2024.
As predicted, the RBA kept its benchmark interest rate at 4.10%.
Technical Outlook
The Euro opens the door to a further collapse. EURUSD is under pressure, and the recent violation of the important 200-day Simple Moving Average (SMA) at 1.0819 appears to increase the possibility of further losses in the near term.
If the EURUSD continues to fall, it may revisit the May 31 bottom of 1.0635, which preceded the March 15 low of 1.0516. The loss of the latter might lead to a test of the January 6 2023 low of 1.0481.
On the upside, spot is projected to test the important 200-day simple moving average at 1.0819. Bulls should hit the weekly high of 1.0945 established on August 30 ahead of the intermediate 55-day SMA at 1.0958 and before the critical 1.1000 level. as well as the August high of 1.1064. When the latter is cleared, the site might attempt the July 27 high of 1.1149. If the pair moves above this level, it might relieve some of the negative pressure and even reach the July 18 top of 1.1275. The 2022 high is at 1.1495, and it is closely followed by the round level of 1.1500.
Nonetheless, substantial losses in EURUSD are possible if the 200-day SMA is convincingly violated.
