- The Euro lags after weaker-than-expected Eurozone PMI data releases.
- The US dollar remains strong amid risk aversion; attention turns to FOMC minutes.
- The EUR/USD pair remains under pressure, with focus on the weekly lows and the 1.0745/50 area.
After a two-day rebound, the EUR/USD pair resumed its slide and fell to test last week's lows near 1.0760. The pair holds a bearish bias due to a stronger US dollar and as the Euro lags. Meanwhile, hawkish talk around the European Central Bank (ECB) failed to support the common currency, as data from the Eurozone mostly came in below expectations.
The Eurozone's May preliminary PMIs showed a decline in the Manufacturing index, below expectations, to 44.6, the lowest level in 36 months. The Service index dropped from 56.2 to 55.9, slightly above the market consensus of 55.6. Inflation indicators from the PMIs showed an improvement; however, signs from the Services sector's inflation, something ECB officials recently spoke about, rose slightly. In Germany, the Manufacturing Index dropped to 42.9, a 36-month low, while the Service Index unexpectedly rose from 56 to 57.8, the highest level in 21 months.
In contrast, the US dollar has remained strong, supported by market risk aversion and mixed US economic data. While the Services PMI improved, the Manufacturing PMI contracted, falling below expectations to 48.5. The DXY rose 0.30% but failed to break above last week's highs.
Looking ahead, market participants will be closely watching the upcoming economic data releases from the Eurozone, including the German IFO Survey and the European Central Bank Economic Bulletin. In addition, the release of the FOMC minutes from the latest Federal Reserve meeting and the ongoing debt-ceiling negotiations in the United States will gather attention.
EUR/USD short-term technical outlook
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The EUR/USD pair respected a downtrend channel and resumed its downward movement. The bias remains tilted to the downside, and a break below 1.0760 should lead to a test of the 1.0750 area. Below that level, the next target is 1.0720, with 1.0700 potentially offering support if reached.
The 1.0800 area has become the immediate resistance level, with a dynamic downtrend line waiting at 1.0810. A break above the latter would negate the current short-term negative outlook, favoring a consolidation with a bias for an extension to 1.0850.
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