Euro analysis: EUR/USD Bulls Defend Support in the Mid-1.06s

US Dollar and Fed Takeaways

Eurozone PMIs are on tap tomorrow, with expectations showing the potential for continued contraction.
EUR/USD remains within a bearish channel as it tests a key support zone in the mid-1.06s.
A breakdown could expose the 2023 lows near 1.0525 whereas bounces could be capped at 1.08.

Euro Fundamental Analysis

It’s been an interesting day on the European continent so far, with the higher-profile Swiss National Bank and Bank of England leaving interest rates unchanged and the more peripheral Norges Bank and Riksbank both raising interest rates.

Lost among all of today’s central bank meetings, the eurozone will release arguably one of its most important economic indicators tomorrow. Individual European countries, then the currency zone as a whole, will publish the latest flash PMI readings, one of the timeliest measures of “on the ground” economic activity. Traders and economists expect the readings to come in at 49.3 for Eurozone Services PMI and 43.3 for the Manufacturing survey, signaling an outright contraction in economic activity.

While the European Central Bank left the door open for additional rate hikes last week, ongoing weakness in the underlying economy will make the case for additional tightening tenuous, potentially opening the door for more weakness in the euro.

Euro Technical Analysis – EUR/USD Daily Chart

Source: TradingView, StoneX

As the chart above shows, EUR/USD remains within a two-month bearish channel, though bulls are trying to make their stand in the 1.0635-1.0675 support zone.

That will be the key area to watch for the rest of the week and likely beyond: If we see a daily close below 1.0635 support, it would open the door for another leg lower in EUR/USD toward the year-to-date lows in the 1.0525 zone. On the other hand, as long as support in the mid-1.06s holds, the potential for a bounce up toward the 200-day EMA near 1.08 remains.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.