Synopsis:

ANZ sees balanced near-term risks for EUR/USD, with a potential upside target of 1.09 and downside support around 1.0710. Weak EU data and anticipated ECB rate cuts weigh on the EUR, though US economic indicators are expected to be the primary driver for the pair’s direction this week.

Key Points:

• EU composite PMI rose slightly to 49.7, while manufacturing PMI improved to 45.9, its highest in five months. However, services PMI declined to 51.2, with employment metrics at multi-year lows.
• Services employment fell to its lowest in 44 months, and composite employment reached a 49-month low (excluding pandemic lows).
• The market is now leaning toward a 50bps rate cut by the ECB in December, adding to the EUR’s challenges.
• US data this week will likely drive EUR/USD, with downside risk to 1.0710 and upside potential up to 1.09.

Conclusion:

ANZ anticipates balanced risks for EUR/USD in the near term, as weak EU data and expected ECB cuts counter any upward movement. US data will be the main influence on EUR/USD’s path, with 1.0710 providing downside support and 1.09 representing a near-term cap.