- EUR/USD's repeated failure to close above 1.11 is a cause for concern for the bulls.
- EUR may suffer a flag breakdown on the 4-hour chart if Germany's PMI prints below estimates.
EUR/USD is on the defensive ahead of the release of all the all-important flash German and Eurozone Purchasing Managers' Index (PMI) readings for the month of August.
The common currency's sell-off from the Aug. 5 high of 1.1250 ran out of steam at lows near 1.1066 on Aug. 16. However, the bulls have not been able to capitalize on the seller exhaustion. Notably, a close above 1.11 remained elusive for the third straight day on Wednesday.
Further, the pair has created a bear flag pattern, a bearish continuation setup, on the 4-hour chart. So, it seems safe to say that the common currency is trading on slippery ground.
Eyes PMIs
Germany's Markit Manufacturing PMI, scheduled for release at 07:30 GMT, is expected to show the activity fell deeper into contraction territory in August. The PMI is expected to ease to 43.0 from July's reading of 43.2. Meanwhile, Markit Services PMI (Aug) is seen easing to 54.0 from 54.5.
The European Central Bank is already under pressure to ease more and the dovish expectations would be bolstered if the German manufacturing PMI prints below estimates. In that case, the EUR/USD pair may drop below 1.1065, confirming a bear flag breakdown on the 4-hour chart.
On the higher side, a daily close above 1.11 is needed to weaken bearish pressures. That could happen if both the German and Eurozone manufacturing PMIs (due at 08:00 GMT) beat estimates by a big margin.
It is worth noting that the minutes of the Federal Reserve's July meeting released on Wednesday showed the policymakers were reluctant to start a full-blown easing cycle. So, forcing a convincing break above 1.11 is going to be a tough task for the EUR bulls.
Also, the Italian political uncertainty and the weakness in China's Yuan could complicate matters for EUR/USD. As of writing, the pair is trading at 1.1084, having hit a high of 1.1092 in the Asian session.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
USD/JPY holds above 155.50 ahead of BoJ policy announcement
USD/JPY is trading tightly above 155.50, off multi-year highs ahead of the BoJ policy announcement. The Yen draws support from higher Japanese bond yields even as the Tokyo CPI inflation cooled more than expected.
AUD/USD extends gains toward 0.6550 after Australian PPI data
AUD/USD is extending gains toward 0.6550 in Asian trading on Friday. The pair capitalizes on an annual increase in Australian PPI data. Meanwhile, a softer US Dollar and improving market mood also underpin the Aussie ahead of the US PCE inflation data.
Gold soars as US economic woes and inflation fears grip investors
Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States. GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Fed could lower borrowing costs.
Stripe looks to bring back crypto payments as stablecoin market cap hits all-time high
Stripe announced on Thursday that it would add support for USDC stablecoin, as the stablecoin market exploded in March, according to reports by Cryptocompare.
Bank of Japan expected to keep interest rates on hold after landmark hike
The Bank of Japan is set to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April. The BoJ will announce its decision on Friday at around 3:00 GMT.