Euro remains depressed in the sub-1.1000 zone ahead of US docket

  • Euro extends Monday’s decline to the sub-1.1000 area against the US Dollar.
  • Stocks in Europe navigate in a “sea of red” so far on Tuesday.
  • EUR/USD drops to two-day lows and revisits the 1.0970 region.
  • The USD Index (DXY) appears bid around the 102.00 hurdle.
  • Final Manufacturing PMIs in the euro area and Germany match the flash prints.
  • Germany’s jobs report came in above expectations in July.
  • The ISM Manufacturing PMI takes centre stage across the ocean.

During the first half of the week, the Euro (EUR) continued to face selling pressure against the US Dollar (USD), causing EUR/USD to once again decline below the 1.1000 level on turnaround Tuesday.

Meanwhile, the Greenback remained strong and supported the USD Index (DXY) in its attempt to break the significant resistance level around 102.00. This strength in the US Dollar persisted despite the lack of significant movement in US yields across the yield curve and appeared bolstered by the overall weakness in riskier assets.

This week, the focus will be on key economic data releases in both the United States and Europe, which will likely test the recently emphasized data-dependence approach adopted by both the Federal Reserve and the European Central Bank (ECB) in their decisions on interest rates.

In Europe, the final Manufacturing Purchasing Managers’ Index (PMI) figures in Germany and the broader euro area fell in line with the preliminary readings at 38.8 and 42.7, respectively, for the month of July. In addition, a positive surprise came from the Germany’s labour market report in July, as the Unemployment Rate eased to 5.6% and the Unemployment Change shrank by 4k individuals. Later in the session, the jobless rate for the broader Euro area will also be released.

In the United States, the primary focus will be on the ISM Manufacturing PMI, accompanied by the final Manufacturing PMI and Construction Spending data.

Daily digest market movers: Euro loses further ground on Dollar’s bounce

  • The EUR loses its grip and slips back below 1.1000 vs. the USD.
  • The USD Index climbs to new three-week top past 102.00.
  • Final PMIs matched preliminary estimates in Germany and the the Euro area.
  • The German labour market posted firm results during last month.
  • The RBA holds rates steady at 4.10%, matching consensus.
  • Chinese Caixin Manufacturing PMI drops below 50 in July.
  • Market focus remains on the US labour market this week.

Technical Analysis: Euro faces a probable drop to 1.0943

EUR/USD extends the bearish performance in the first half of the week and revisits the area below the psychological 1.1000 mark on Tuesday.

If bears push harder, EUR/USD should put the weekly low of 1.0943 (July 28) to the test sooner rather than later ahead of a probable move to the interim 55-day and 100-day SMAs at 1.0910 and 1.0908, respectively. The loss of this region could open the door to a potential visit to the July low of 1.0833 (July 6) ahead of the key 200-day SMA at 1.0728 and the May low of 1.0635 (May 31). South from here emerges the March low of 1.0516 (March 15) before the 2023 low of 1.0481 (January 6).

On the other hand, occasional bullish attempts could motivate the pair to initially dispute the weekly top at 1.1149 (July 27). Above this level, the downside pressure could mitigate somewhat and encourage the pair to test the 2023 high at 1.1275 (July 18). Once this level is cleared, there are no resistance levels of significance until the 2022 peak of 1.1495 (February 10), which is closely followed by the round level of 1.1500.

Furthermore, the constructive view of EUR/USD appears unchanged as long as the pair trades above the key 200-day SMA.

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