Despite the US dollar's strong rise over a very short period of time, the pair is still moving in the same direction. On Friday, USD showed signs of the overbought market, so there were all the conditions for a pullback. Yet, the European currency has declined below the parity level and continues to fall, approaching the level of 0.9900. It seems that investors have lost faith in everything except for the US dollar.
At the same time, the greenback remains largely overbought, and traders continue to buy it. Yesterday, it became clear that to make a proper rebound, the pair needs some significant macroeconomic news. However, estimates of the upcoming PMI data suggest that the US dollar will be winning again. The outlook for the European region is mostly negative. Thus, the Services PMI is expected to decline to 50.8 from 51.2. The Manufacturing PMI is forecasted to drop to 48.6 from 49.8. This will result in the Composite PMI falling to 49.3 from 49.9.
Composite PMI (EU):
Analysts give similar forecasts for the business activity index in the UK. Thus, the PMI in the manufacturing sector is expected to fall to 51.3 against the previous reading of 52.1. The services PMI will most likely decrease to 51.8 from 5.6, while the Composite PMI will drop to 51.3 from 52.1.
Composite PMI (UK):
The situation is slightly different in the US. The Manufacturing PMI is predicted to move lower to 51.1 from 52.2. At the same time, the PMI in the services sector is expected to rise to 48.0 from 47.3. Given its weight in the index, it will push the Composite PMI from 47.7 to 49.0
Composite PMI (US):
While European indices are falling, the main indicator of business activity in the US is appreciating. This factor may serve as a driver for the US currency.
In the course of the downside movement, the EUR/USD pair has dropped below the parity level. For the past week and a half, the euro has depreciated by 400 pips which is a clear sign of an oversold market. The further dynamic of the pair will depend on traders' sentiment while technical analysis points to a possible formation of a pullback.
The GBP/USD pair follows the same downward dynamic. As a result, the quote has reached a new low. If the price holds firmly below 1.1750, the pound sterling is set to depreciate further.
