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Jul 22 - 11:55 AM

EUR/USD - COMMENT-Dour PMIs Show Bearish Fundamentals Hold Trump Card For EUR/USD

By Christopher Romano  —  Jul 22 - 10:25 AM

EUR/USD has been hemmed in between the 10-day moving average, 38.2% Fibo of 1.0787-0.9952 and 21-DMA as it consolidates gains off the July 14 low, which would normally be a bullish setup, but Friday's dismal PMIs demonstrated that data and interest rates could overshadow technicals.

July composite PMIs showed an unexpected contraction in euro zone and U.S. business activity nZRN004S4MnZON005ZC3 and Australia on the brink, stoking concerns about slowing global growth, a key European economic driver.

September 2023 Euribor prices FEIU3 extended their rally away from structural support -- which survived a test on Thursday -- as investors lowered terminal ECB rate expectations.
Price action suggests a bottoming and potential for lower rates.

The data helped increased the dollar's yield advantage, as German 2-year yields fell sharply, widening the German-U.S.
2-year spread US2DE2=RR.

Expectations for the terminal Fed rate EDZ2 have also been reduced, but investors still expect it to remain higher than the euro zone, which should weigh on EUR/USD unless rate differentials reverse.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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