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The downward path of the EUR/USD currency pair is getting stronger, as the most famous currency pair in the forex market collapsed to the support level 1.0760, its lowest in almost two months. Its losses may increase more if the results of the US economic data. The content of the meeting minutes of the US Federal Reserve are supportive to the current strength of the US dollar.
On the economic side, manufacturing activity in the eurozone contracted this month at the fastest pace since the pandemic shut down factories three years ago, threatening to sap momentum from the service-driven economy. An index based on surveys of purchasing managers across the region unexpectedly fell to 44.6 in May, below the 50 level that indicates contraction, according to a report from S&P Global. A similar metric for services also fell, although its reading of 55.9 still indicated strong growth.
The report adds to mounting evidence that manufacturing problems in Germany, Europe’s largest economy, are an increasing burden on the wider region. That chimes with a survey released Monday by business lobby DIHK, which indicated zero growth there this year as companies see no sign of a rebound. The PMI figures still suggest overall growth, although they leave a question mark about its pace, which could cast doubt on whether the eurozone can grow as much as 0.4% in the quarter as indicated by the European Commission’s forecast. issued last week.
Commenting on this, Cyrus de la Robbia, chief economist at Hamburg Commercial Bank, said in a statement: “GDP is likely to have grown in the second quarter thanks to the healthy state of the service sector.” However, the manufacturing sector is a strong drag on the momentum of the economy as a whole. German companies from this sector are particularly hard on the brakes.”
The shadow on growth depicted in the report is accompanied by mixed evidence of continued pipeline pressures on inflation, again reflecting divergence across industries. Producer prices fell for the first time since September 2020, while service firms reported higher pricing power amid rising demand. Earlier data showed similar trends in France and Germany, while the Japan Composite Index jumped. In the US and UK, activity is expected to slow but remain in the growth zone.
- According to the performance on the daily chart below, the general trend of the EUR/USD currency pair is still bearish.
- The move below the psychological support level of 1.0800 supports the bears’ control over the trend.
- Bearing in mind that the move towards the support levels 1.0710 and 1.0660 moves the technical indicators towards strong oversold areas.
On the other hand, the bulls will not control the trend again without moving the currency pair towards the psychological resistance level of 1.1000 again. The EUR/USD currency pair will be affected today by the markets’ reaction to the announcement of the contents of the minutes of the last meeting of the US Federal Reserve Bank.
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