Euro slips toward 1.1200 as US economic strength overshadows Eurozone

EUR/USD declines for the third consecutive day on Friday, trading around 1.1200, down 0.12% at the time of writing. The Euro (EUR) remains under pressure following the release of disappointing business activity data from the Eurozone, while the US Dollar (USD) benefits from renewed demand, supported by a resilient US economy and monetary policy expectations around the Federal Reserve (Fed).

Preliminary data released on Friday showed a slowdown in private-sector activity across the Eurozone in October. The HCOB Composite Purchasing Managers Index (PMI) fell to 51.9 from 53.1 in September, indicating a more moderate expansion in economic activity.

The deterioration reflects slower growth in Germany, the Eurozone's largest economy, alongside an unexpected contraction in France's private-sector activity. These figures reinforce concerns about the European economic outlook, while France's fiscal challenges and ongoing political uncertainty continue to weigh on the single currency.

In contrast, US economic indicators released on Friday confirm the resilience of private-sector activity in the United States (US). According to preliminary data from S&P Global, the Manufacturing PMI rose to 56 in October from 55.9 in September, exceeding market expectations of 55.6 and reaching its highest level in 53 months.

The Services PMI stood at 57.9, in line with forecasts, following September's reading of 58.8. Meanwhile, the Composite PMI eased slightly to 57.6 from 58.4 in the previous month, but remains well above the 50 threshold separating expansion from contraction.

This divergence between US and European economic performance contributes to the weakness in EUR/USD, reinforcing the relative appeal of the US Dollar.

Meanwhile, expectations surrounding the Fed's monetary policy provide additional support to the Greenback. Despite recent comments from several central bank officials suggesting there is no urgency to raise interest rates, markets are pricing in an approximately 80% chance of another rate hike in December, amid inflationary risks linked to Oil prices.

Investors now turn their attention to next week's Fed monetary policy meeting, with the interest rate decision scheduled for Wednesday. In the absence of updated economic projections, markets will closely examine the policy statement and comments from Fed Chair Kevin Warsh during the subsequent press conference.

EUR/USD technical analysis

In the one-hour chart, EUR/USD trades at 1.1203, keeping a bearish near-term bias as it holds beneath both the 200-period simple moving average (SMA) at 1.1214 and the 100-period SMA at 1.1222. The pair is hovering just above the intraday floor at 1.1190, while the Relative Strength Index (14) around 46 suggests subdued momentum and favors a continuation of mild downside pressure unless the overhead averages are reclaimed.

On the downside, immediate support is located at 1.1190, ahead of deeper levels at 1.1150 and 1.1114 if selling interest accelerates. On the topside, initial resistance is seen at the 200-period SMA at 1.1214, followed by the 100-period SMA at 1.1222, with stronger barriers at 1.1260 and 1.1285 likely to cap any recovery attempts while the pair trades below these levels.

(The technical analysis of this story was written with the help of an AI tool. Know more.)