EUR/USD Bulls Defend Support in the Mid-1.06s
2023.09.22 04:29
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 the 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, 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.
Original Post
