EUR/USD got rejected from the 1.0950 area after a bout of EUR weakness.
Are we looking at a pullback opportunity in the making?
Before moving on, ICYMI, yesterday’s watchlist looked at AUD/USD’s mid-channel support ahead of China’s official PMI releases. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
ADP U.S. Private Payrolls Change for August: +177K (210K forecast). July revised higher to 371K
The second estimate for U.S. GDP Growth for Q2 2023 came in lower at 2.1% y/y vs. 2.2% forecast; quarterly core PCE Prices Index change at 3.7% (3.8% forecast, 4.9% previous)
U.S. Goods Trade Balance for June 2023: -$91.18B (-$94.0B forecast; -$68.3B previous); Year-to-date, the goods and services deficit decreased by $117.7B (22.3%)
U.S. Pending home sales index surprised with a +0.9*% m/m gain vs. -0.4% m/m forecast / 0.3% m/m previous
EIA: U.S. crude oil inventories dropped by 10.6 million barrels from the previous week (vs. -2.2M expected, -6.1M previous)
Japan’s industrial production fell 2.0% from June to July (vs. 1.4% drop, 2.4% gain in June); manufacturing machinery and electronic components are the biggest drags
Japan’s retail sales accelerated from 5.5% y/y to 6.8% y/y in July (vs. 5.6% in June); a monthly increase of 2.1% from June’s 0.4% uptick
ANZ: New Zealand business confidence lifted another 9 points to -3.7, the highest reading since mid-2021 as inflation indicators continued to ease
Australia’s private capital expenditures rose by 2.8% q/q in Q2 (vs. 1.1% expected, 3.7% previous) led by investment in new equipment and machinery
China’s manufacturing PMI at 49.7 in August (vs. 49.1 expected, 49.3 previous)
China’s non-manufacturing PMI at 51.0 (vs. 51.3 expected, 51.5 previous); data marked its fifth consecutive weakening in August
ECB’s Isabel Schnabel said risk-free rates “are now back to February’s levels…This decline could counteract our efforts to bring inflation back to target in a timely manner.”
Japan’s housing starts down by 6.7% y/y (vs. -1.3% expected, -4.8% previous); down for a second consecutive month in July
Germany’s retail sales slipped by 0.8% m/m in July (vs. 0.3% expected, -0.2% previous)
Price Action News
One of the biggest headlines during Asian session trading is China’s official PMIs. While the manufacturing PMI came in stronger in August, factory activity shrinking for a fifth month in a row was not welcome news to risk-takers. Meanwhile, the non-manufacturing PMI weakened further from 51.5 to 51.0, marking the fifth consecutive deterioration for the report.
But it was the euro that took the most hits today, as strong CPI reports from Germany, France, and Spain highlighted the possibility of a higher-for-longer interest rate situation in the region.
It also didn’t help that ECB board member Isabel Schnabel noted that the decline in “risk-free rates” in the Eurozone may have undone some of the ECB’s tightening progress.
EUR is trading lower against its major counterparts but has so far lost the most pips against JPY, USD, and CAD.
Upcoming Potential Catalysts on the Forex Economic Calendar:
ECB’s meeting minutes at 11:30 am GMT
U.S. core PCE price index at 12:30 pm GMT
U.S. initial jobless claims at 12:30 pm GMT
U.S. personal income and spending at 12:30 pm GMT
U.S. Chicago PMI at 1:45 pm GMT
Japan’s capital spending at 11:50 pm GMT
China Caixin manufacturing PMI at 1:45 am GMT (Sept 1)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
EUR/USD: 15-min
As mentioned above, speculations of higher or higher-for-longer interest rates in the Eurozone weighed on the common currency earlier today.
In EUR/USD’s case, that meant that the pair had extended its downswing from its 1.0950 weekly highs.
How low can EUR/USD go before finding buyers again?
The pair is trading at the S1 (1.0870) Pivot Point level in the 15-minute time frame, which conveniently lines up with almost half of EUR/USD’s 70-pip daily average volatility.
Of course, the Eurozone has yet to print a couple of reports including ECB’s meeting minutes. Meanwhile, the U.S. is set to print its core PCE price index – the Fed’s preferred inflation gauge – as well as its weekly jobless claims data.
If today’s U.S. reports support another rate hike pause from the Fed as other closely watched reports have been printing, then EUR/USD may return to its intraweek uptrend.
We may also see some profit-taking ahead of the U.S. NFP report, which may undo part of today’s EUR/USD downswing.
I’m keeping close tabs on the 1.0870 zone or the 1.0840 area of interest if the former doesn’t hold as support.
A long trade at the first signs of a bounce may work if we see an anti-USD sentiment in the next trading sessions.
Watch this setup closely, errbody!
