- Data on Wednesday showed a drop in eurozone business activity in July.
- The composite PMI rose to 55.0, indicating an increase in business activity.
- Forecasts show that the economy grew by 2.0% in Q2.
The EUR/USD forecast is pessimistic as the Euro remains fragile following disappointing Eurozone PMI data. In contrast, business activity in the US improved.
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Data on Wednesday showed a drop in eurozone business activity in July. The composite PMI fell from 50.9 in June to 50.1. According to experts, the decline indicates that the recovery of the Eurozone economy has stalled. Moreover, the manufacturing sector performed poorly, especially in Germany. In the bloc, manufacturing PMI hit a 7-month low of 45.6 in July. Moreover, economists predict that the economy will grow by an average of 0.7% in 2024 and 1.4% in 2025.
Ideally, a weak economy would increase bets on a rate cut by the European Central Bank. However, the outlook remains unclear as policymakers said inflation remains high. Still, economists expect another ECB cut in September.
Meanwhile, the composite PMI rose to 55.0 in the US, pointing to increased business activity. Although markets fully discounted prices in September, economists warned that policymakers may remain cautious. Notably, the US economy remains resilient, which means demand remains high. Therefore, if the Fed tapers too soon, inflation could soar.
Investors will later watch the first estimate of second-quarter GDP to learn more about the Fed’s rate cut prospects. Forecasts show that the US economy grew by 2.0%. This would be an improvement on the first quarter’s growth of 1.4%.
EUR/USD key events today
- US GDP growth q/q
- US unemployment claims
EUR/USD Technical Forecast: Bulls re-emerge in downtrend to retest 30-SMA
On the technical side, the EUR/USD price is in a new bearish trend after breaking below the 30-SMA. At the same time, the RSI broke below 50 to support the bearish momentum. In particular, the bears took control when the price approached the 1.0950 resistance level. However, the decline was weak at first, and the price made small-bodied candles. In addition, it stayed close to the SMA.
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Now the price has found its foothold below the SMA, but is pulling back. It may retest the SMA before proceeding to the 1.0800 support level. The downtrend will continue if the price stays below the SMA and RSI below 50.
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