. EUR/USD Slumps Below 1.0900 Ahead of US PMI - 03 July 2023

EUR/USD Slumps Below 1.0900 Ahead of US PMI

EUR/USD Slumps Below 1.0900 Ahead of US PMI

03 Jul 2023

EUR/USD Continues to Decline Below 1.0900 Ahead of US ISM PMI

Fundamental Overview

In the European session, the EUR/USD is experiencing ongoing losses below the 1.0900 level, as the US Dollar strengthens and risk sentiment remains subdued. Market participants are cautious ahead of the highly anticipated US ISM Manufacturing PMI and in light of the upcoming US Independence Day holiday.

After a modest recovery on Friday, the EUR/USD lost momentum during Monday’s European morning and dropped below the critical 1.0900 mark. From a technical perspective, the pair is still in bearish territory, and if the support at 1.0840 gives way, further losses might ensue.

The recent decline in the US Dollar (USD) was triggered by lackluster Personal Consumption Expenditures (PCE) inflation data from the US, which allowed the EUR/USD to recover from its weekly losses. On an annual basis, the PCE Price Index fell from 4.3% in April to 3.8% in May, while the Core PCE Price Index decreased from 4.7% to 4.6%.

However, despite the impact of the PCE inflation data, market positioning suggests that it had little influence on the Federal Reserve’s (Fed) rate forecast. The USD’s downward movement on Friday might have been amplified by quarter-end flows.

Later today, the US economic docket will feature the release of the ISM Manufacturing PMI data. Investors anticipate a slight increase in the headline PMI, from 46.9 in May to 47.2 in June. If the reading surpasses the 50 levels, the USD’s strength may be sustained throughout the afternoon.

It’s worth noting that the US stock and bond markets will close early on July 4th in observance of the holiday. As a result, the trading environment in the American session is expected to be subdued, potentially causing the EUR/USD to struggle in finding direction.

EUR/USD Technical Analysis Daily Chart

Technical Overview

The EUR/USD is currently trading within an upward channel. The pair remains positioned above the 20 and 50 Simple Moving Averages (SMA). The Relative Strength Index (RSI) indicates a bullish sentiment, while the Stochastic oscillator suggests a downward trend.

Resistance Level: 1.09228 Immediate Support Level: 1.08974

How to Trade EUR/USD

After a significant move, the EUR/USD is now retracing from the resistance level and currently trading near a crucial support area. If this support level is breached, further downside potential could be expected.

Trade Suggestion: SELL at 1.0908, TAKE PROFIT at 1.0870, SL at 1.0945

Frequently Asked Questions (FAQs)

Q: What is the significance of the US ISM PMI for the EUR/USD?

A: The US ISM PMI is an important economic indicator that measures the health of the manufacturing sector in the United States. As the EUR/USD is influenced by factors affecting both the euro and the US dollar, any surprises in the PMI data can impact the currency pair’s direction.

Q: Why did the EUR/USD experience losses below 1.0900?

A: The EUR/USD declined below the 1.0900 level due to the recent strengthening of the US Dollar and the prevailing cautious sentiment among traders. Uncertainty surrounding the upcoming US ISM Manufacturing PMI and the US Independence Day holiday contributed to the subdued market environment.

Q: What technical factors should traders consider for the EUR/USD?

A: Traders should monitor the EUR/USD’s position relative to key support and resistance levels, as well as the behavior of technical indicators such as the Relative Strength Index (RSI) and the Stochastic oscillator. These factors provide insights into the pair’s bullish or bearish momentum.