EUR Outlook Dominated by Support at 55-day MA (1.3194) vs the US Dollar, EUR/GBP in Fresh Slump
The Euro (Currency:EUR) is mixed on the forex markets on Monday morning:
- The Euro Dollar exchange rate is flat on Friday night's closing rate; 1 EUR converts to 1.3224 USD.
- The Euro Pound exchange rate is 0.45 pct in the red; 1 EUR converts to 0.8491 GBP. The Pound Sterling has today benefited from a massive beat on UK Manufacturing PMI.
- The Euro Australian Dollar exchange is 1.1 pct in the red; 1 EUR converts to 1.4694.
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Euro Dollar Outlook Supported by 1.3194
The Euro Dollar exchange rate may have tentatively broken out of a near-term resistance level at 1.3194; however we should expect this level to provide some gravitational pull in coming sessions.
Emmanuel Ng at OCBC says:
"The EUR-USD may look increasingly capped pending further news flow with the pair threatening to seep below its 55-day MA (1.3194) and any sustained violation may invite a drift towards 1.3175 ahead the 200-day MA (1.3144).
"Note any dovish ECB rhetoric may be set in contrast 9note less than encouraging data points on Friday) to prevailing Fed taper expectations, further weighing on the pair.
"On the CFTC front, note that net speculative EUR longs increased in the latest week."
Ipek Ozkardeskaya at Swissquote also confirms that this level is key for the future direction of EUR-USD.
The analyst says:
"EURUSD remains well supported above the 50-dayMA (1.3191), yet there is a clear slowdown in the positive trend momentum. EUR is expected to remain range-bound before the ECB’s policy announcement due on Thursday.
"Final PMI data in August should give a minor boost to EUR this morning. Offers are still solid at 1.3400/20 zone."
Today's key driver: Manufacturing PMI
Supporting the shared currency on the fundamental front was the September release of August Markit Manufacturing Purchasing Managers' Index (PMI) which came in at 51.4, compared to 50.3 in July.
Analysts had expected 51.3, so the beat was not as eye-opening as that of the UK.
Italian Manufacturing PMI (Aug): 51.3
Long-term Euro bulls will be heartened by indications that the peripheral Eurozone states are starting to pull their weight and aid Germany in providing support to the currency.
Italy’s manufacturing PMI came in stronger than expected in August, picking up to 51.3 from 50.4.
"Today’s positive surprise adds to the flow of encouraging news seen over recent months and confirms that, at face value, the manufacturing PMI survey is now signalling an expansion in activity, after two years in recessionary territory," says Loredana Federico at UniCredit Research.
According to UniCredit, the July-August figures of the manufacturing PMI suggest a broad stabilization in industrial output in 3Q, which is fully consistent with our view of Italy exiting the recession in the third quarter.
Meanwhile, Greece saw Manufacturing PMI rise to 48.7 (Prev: 47.0), a level that indicates that the under-pressure country is witnessing conditions "close to stabilisation".