Euro Stumbles On Disappointing PMI – Selling Favored On EURUSD

Yesterday, data from Markit indicated that the Final Eurozone Services PMI rose to 52.8 for June from the flash reading of 52.4 previously. The reading was also higher than the expected reading of 52. Yet, growth in the services industry overall was still at the slowest pace for close to 18 months A weaker PMI in Germany, at 53.7, and a contraction in France, at 49.9, weighed down the overall PMI. A lower PMI added to the darkening economic outlook for the Euro Zone.

Meanwhile, in the U.S, a report from the Commerce Department on Tuesday (5/7) indicated that new orders for manufactured goods declined by 1.0% after two straight months of increase. This figure was worse than analysts’ expectation of a 0.8% fall. Additionally, according to a survey of about 900 respondents by TIPPONLINE, consumer confidence came in at 45.5, much lower than economists’ forecast of 49.3. A reading below 50 indicates consumers’ depressing outlook for the world’s largest economy. These negative figures continued to cast a shadow over the strength of the U.S economy.

Furthermore, on Tuesday (5/7), Federal Reserve Bank of New York President William Dudley gave no hints regarding the timing of its next interest rate hike in light of continued uncertainties surrounding the global economy following last month’s surprising Brexit referendum. The probability of a tightening of U.S. Rate hike this year has plunged to 12% from 59% a month ago, based on interest rate futures data.

Minutes from the Fed’s June policy meeting will be released later today and are the focus of attention currently. The non-farm employment numbers for June will be out on Friday. The number is predicted to show 180,000 new jobs created in June. The number for May was a disappointing 38,000, which has also contributed to the circumspect position of the FED on interest rate hikes this year.

The dollar index continues its 3-day plunge to currently trade at 96.14.

eurusd d1

Fig. EURUSD D1 Technical Chart

Yesterday, EURUSD made a sharp move lower to hit the level of 1.10599 – the lowest level since March 16, due to bearish sentiment engulfing the euro. The price is staying under the moving average, suggesting a solidly bearish market. A selling position is also encouraged by the trend indicator. The pair is anticipated to maintain the downtrend. Level 50.0% of Fibonacci retracement has been broken and the market is expected to pull back after testing the level of 61.8 % of Fibonacci retracement.

Trade suggestion

Sell stop at 1.10444, Take profit at 1.10118, Stop loss at 1.10711

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