- EUR/USD plummets almost 1% after encouraging US economic data.
- The US manufacturing PMI shows that the US economy remains in expansion territory.
- The money market futures odds of a 75 basis point rate hike by the Fed stand at 75%.
The EUR/USD breaks below parity, extending losses after hitting a weekly high of 1.0079 on Wednesday, but better-than-expected S&P Global and US ISM Manufacturing data further strengthens the case for a rate hike of 75 basis points by the Fed at the September meeting.
EUR/USD opened near daily highs at 1.0050 but fell below parity after upbeat US economic data releases pushed recession fears to the background. Therefore, EUR/USD is trading around daily lows at 0.9915, below its opening price.
EUR/USD slumps after good US economic data.
Risk aversion drives global equities further down. The US ISM Manufacturing report for August aligned with July’s data at 52.8, beating street estimates of 51.9. Although the data was positive, it is the second lowest reading since June 2020. The subcomponent of the price index fell 7.5 percentage points to 52.5 from 60, portraying the effect of the Federal Reserve’s tightening policy.
Timothy R. Fiore, President of the ISM, “The US manufacturing sector continues to expand at a rate similar to that of the previous two months,” commenting that new orders returned to expansion levels. He added that companies continued to hire at a strong pace in August, with few signs of layoffs.
Coincidentally, initial US jobless claims for the week ending August 27 rose by 232,000, below estimates of 248,000, the Labor Department reported.
For two consecutive days, the US employment data reinforces the Fed’s thesis that in the US, despite being in a technical recession, as shown by GDP, the economy is strong. Wednesday’s JOLTs report, with vacancies above 11 million, coupled with declining jobless claims and ISM Manufacturing PMI hiring comments, could herald a strong US Non-Farm Payrolls report. USA on Friday.
On Friday, the US Labor Bureau (BLS) is expected to release additional employment data. Economists forecast that the economy will add 298,000 jobs and the unemployment rate will remain at 3.5%.
Meanwhile, expectations for a 75 basis point rate hike at the Fed’s September policy meeting pointed to a 75% chance of such a hike.
During the European session, most European country manufacturing PMIs revealed by S&P Global were in contraction territory, with the exception of France. German retail sales beat estimates of -6.6%, falling -2.6%, while the EU unemployment rate was unchanged.
What must be considered
The EU economic calendar will include the German trade balance and the producer price index (PPI) of the common bloc. In the US, the non-farm payrolls report for August, along with the unemployment rate, will shed some light on the direction of EUR/USD.
|Last Price Today||0.9932|
|Today’s Daily Change||-0.0121|
|Today’s Daily Change %||-1.20|
|Today’s Daily Opening||1.0053|
|20 Daily SMA||1.0111|
|50 Daily SMA||1.0195|
|100 Daily SMA||1.0405|
|200 Daily SMA||1.0809|
|Previous Daily High||1.0079|
|Previous Daily Minimum||0.9971|
|Previous Maximum Weekly||1,009|
|Previous Weekly Minimum||0.9901|
|Monthly Prior Maximum||1.0369|
|Previous Monthly Minimum||0.9901|
|Daily Fibonacci 38.2%||1.0038|
|Daily Fibonacci 61.8%||1.0013|
|Daily Pivot Point S1||0.999|
|Daily Pivot Point S2||0.9927|
|Daily Pivot Point S3||0.9882|
|Daily Pivot Point R1||1.0098|
|Daily Pivot Point R2||1.0142|
|Daily Pivot Point R3||1.0205|
Source: Fx Street
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