EUR/USD Forecast: Double-bottom at risk after devastating German data
|- EUR/USD has been under growing pressure as the US dollar gains new strength.
- Euro-zone PMIs and Draghi's testimony stand out at the beginning of a busy week.
- Monday's four-hour chart is pointing to further losses.
Today is the first trading day of the autumn – and clouds are undoubtedly darkening for EUR/USD. Is it ready to tumble down?
Markit's forward-looking Purchasing Managers' Indexes (PMIs) are painting a gloomier picture for the old continent. Germany Manufacturing PMI tumbled down to 41.4 points – a fresh cycle low and well beneath 43.5 points reported in August. An increase was on the cards. The services sector – which keeps propping up the economy – has also suffered a considerable fall from 54.8 to 52.5 points – closer to the 50-point threshold that separates expansion from contraction.
Earlier, French Manufacturing PMI dipped to 50.3 in the preliminary read for September. The services sector is only marginally better with 51.3 points
Overall, Europe seems to be heading into an outright recession.
Mario Draghi, President of the European Central Bank, will testify before the European Parliament later today. This will be his last appearance in the chamber before he steps down in November. Draghi recently oversaw an injection of monetary stimulus – a rate cut and the announcement of a new bond-buying scheme. The central banker also called governments to do more and he will likely repeat his stance today.
US-Sino trade talks are going on – but they seem to be stuck. Officially, both sides said that the negotiations are "productive" and "constructive." However, the chances of an interim deal seem to be diminishing after President Donald Trump stated that he prefers the "big deal" rather than a limited one. The general market mood is somewhat downbeat, keeping the dollar bid.
The US will also have its share of PMIs later today – Markit's flash figures are expected to show weak growth in the US. John Williams, President of the New York branch of the Federal Reserve, will speak later on. He is considered the third most impactful person at the central bank.
EUR/USD Technical Analysis
EUR/USD is suffering from downside momentum on the four-hour chart and the Relative Strength Index (RSI) remains above 30 – thus not pointing to oversold conditions – and allows for more falls. Moreover, EUR/USD is trading below the 50, 100, and 200 Simple Moving Averages – further bearish signs.
Some support awaits at 1.0960, which was a temporary low in August. The next line is critical – 1.0926 is the 2019 trough – and also a double-bottom. Further down, we find 1.09, 1.0820, and 1.0780.
Resistance awaits at 1.0990, which held the pair up late last week. It is followed by 1.1030, that capped EUR/USD early in the day. Next, 1.1075 and 1.1110 await it.
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