- The EUR/USD has broken through the 1.0800 handle as the market pulls back into safe havens.
- The Euro is set for a fifth straight day of declines against the US Dollar.
- Markets breezed right past better-than-expected Eurozone economic data.
The EUR/USD is down around four-tenths of a percent on Tuesday, with the Euro (EUR) declining 0.65% peak-to-trough against the US Dollar (USD) as markets see a fresh round of risk-off flows into safe havens.
Eurozone economic data broadly beat the street early Tuesday, but with the majority of investors seeing souring risk appetite following a Moody’s credit downgrade on China, data releases had limited impact and sentiment flows dominated the FX charts.
Tuesday’s selloff sees the Euro touching chart paper south of 1.0800, but the pair is seeing some rebalancing heading into the trading day’s closing bell.
The Eurozone HCOB Composite Purchasing Managers’ Index (PMI) printed above expectations in November, coming in at 47.6 MoM versus the forecast hold at October’s reading of 47.1.
US Data: good news is bad news narrative holds for market risk appetite
US data extended the overall dour market sentiment, with JOLTS Job Openings dipping to a two-and-a-half-year low amidst a tight US labor market, and the Institute for Supply Management’s (ISM) Services PMI came in higher than expected at 52.7 for November, compared to the market’s median forecast of 52.0 versus October’s 51.8.
The US services sector, one of the largest contributors to US Gross Domestic Product (GDP), is continuing to show a firm healthy trend and a tight labor market with fewer jobs on offer means economic conditions within the US are too tight for the Federal Reserve (Fed) to even begin to consider a rate cut cycle. With investors broadly hungry for an accelerated path towards declining interest rates, a bumping US economy pushes away rate cut expectations further out, and thus good news is bad news for markets burdened with rising borrowing and financing costs on the back of higher interest rates.
Wednesday brings Eurozone Retail Sales, which are forecast to improve but still print in negative territory, slated for a rebound from -2.9% to -1.1% for the annualized period into October.
Thursday will follow up with Eurozone Gross Domestic Product (GDP) figures, and the third quarter is expected to hold flat at 0.1% on a YoY basis, and Friday will close out the trading week with another print of US Nonfarm Payrolls (NFP), which is forecast to print another increase from 150K to 185K.
EUR/USD Technical Outlook
The EUR/USD's decline below 1.0800 on Tuesday sees the pair chalking in a fifth straight day of declines, and the Euro is down a little over two percent against the US Dollar from last week's peak bids near 1.1020.
The Euro's backslide sees the EUR/USD slipping through the 200-day Simple Moving Average (SMA) currently treading water near 1.0820.
Continued bearish pressure will see a technical barrier from the 50-day SMA which has turned bullish and is rising into the 1.0700 handle, while bidders will be looking to stage a recovery back over the 200-day SMA before the EUR/USD slides too deep into retracement territory between 1.0750 and 1.0700.
EUR/USD Daily Chart
EUR/USD Technical Levels
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