EUR Under Pressure

The Euro is coming under fresh selling pressure today on the back of the latest set of eurozone PMIs this morning. The manufacturing reading was seen remaining firmly in negative territory, printing 43.7. While slightly higher than the prior 42.7 reading and the 42.8 the market was looking for, the data makes for disappointing reading and confirms that the factory sector rut continues to dominate. More worrying was the fact that German manufacturing, the engine of the eurozone, was seen falling at its fastest rate since May 2020.

Overall Business Activity Plunges

The services sector was also seen struggling last month. The eurozone services PMI fell back into negative territory last month at 48.3 vs 50.9 prior and 50.6 expected. The decline saw the services sector PMI dropping into negative territory for the first time since December last year. Finally, the composite figure registered a 47 reading, down from 48.6 previous. At this level, overall business activity in the eurozone fell to its lowest level since November 2020.

Downside Risks for Eurozone

The data strikes yet a further blow to those calling for continued ECB tightening. With the eurozone economy struggling greatly, further ECB tightening presents a heavy downside risk for activity. Still, with inflation remaining elevated, the ECB likely has little choice, meaning that growth risks remain pointed to the downside for the eurozone. As such, EUR looks vulnerable to further downside going forward.

Technical Views

EURUSD

The reversal from the higher above 1.12 has seen EURUSD breaking down through 1.1126 and through the rising trend line. Price is now testing the 1.0785 level support and, with momentum studies bearish, the market is vulnerable to a fresh break lower here, targeting 1.0515 next.