Overview:
The Euro started a new week with falls against the United States Dollar, retracing some of Friday's strong rebound, as economic data from Eurozone economies continue to disappoint. Right now, the EUR/USD pair is calling for strong bullish market as long as the trend is still trading above the area of 1.0900 - 1.0850 has already seen the release of many Purchasing Managers Index numbers, from Europe and elsewhere.
These closely-watched indicators offer a timely steer on economic direction.Europe's latest have been generally shaky, with Germany's manufacturing release perhaps the most concerning. The EUR/USD pair has broken through the sharp daily-chart uptrend which until last week had supported its fightback from the lows of early August.
The EUR/USD pair traded higher and closed the day in the positive territory around 1.0900. Today it was trading in a narrow range of 1.0850 - 1.0900, staying close to Friday's closing price. On the hourly chart, the EUR/USD pair is testing the strength of the support - the moving average line MA (100) H1 (1.0900).
On the 30M chart, the EUR/USD pair is still above the MA 50 H4 line. Based on the foregoing, it is probably worth sticking to the north direction in trading, and as long as the EUR/USD pair remains above MA 50 same chart, it may be necessary to look for entry points to buy at the end of the correction.
The headline figure there has been below the key 50 level separating expansion from contraction since July last year and the most recent release, for June, was sadly no exception. The PMI limped in at 40, its weakest for three years, with firms reporting deeper production cuts as demand continues to decline.
The euro remained at $1.09 as investors digested mixed inflation data in the Euro Area and the ECB's pledge to continue raising interest rates. Headline inflation for the Eurozone eased to 5.5% in June from 6.1%, but the core rate increased to 5.4% from 5.3%. At the national level, inflation is moving in different directions. In Germany, the CPI accelerated to 6.4% from a 14-month low recorded in May.
However, inflation in Italy and France slowed, and the Spanish rate fell to 1.9%, making it the first country in the Euro Area to meet the ECB target of 2%. Meanwhile, traders continue to anticipate the ECB's deposit peak rate to reach 4%, with another increase expected in July. Additionally, policymakers have signaled a likely further hike in September. The Euro is set to finish Q3 little changed and only slightly below the key level of $1.1.
Probably, the main scenario is continued growth towards 1.0977 (last month's high). The alternative scenario is consolidation below MA 100H1, followed by fall to 1.0815 (last bearish wave).
