The euro is down sharply today, as the US dollar continues to post gains against the major currencies. In the European session, EUR/USD is trading at 0.9746, down 0.90%. It has been a dreadful week for the euro, which has declined by 2.6% and continues to set new 20-year lows.
German, eurozone PMIs continue to decline
The eurozone economy is in deep trouble, and today’s PMI releases only confirmed that grim fact. German Services and Manufacturing PMIs, already in contraction territory (below 50.0), fell even lower in August, with readings of 48.3 and 45.4, respectively. It was a similar story for eurozone PMIs, which also slowed in August. The one exception was the French Services PMI, which surprised with a reading of 53.0. Predictably, the euro has taken a tumble today and I expect the currency to remain under pressure come Monday.
The euro is also taking it on the chin as risk sentiment has eroded. Ukraine continues to press its counter-offensive, but an unpredictable Russian President Putin has escalated the conflict to a dangerous level. The regions occupied by Russia are currently holding a referendum about joining Russia, and the vote is clearly a sham. The danger is that Putin has said he will take all measures to defend “Russian territory” and has hinted at using nuclear weapons. This has drawn sharp condemnation from the West and shaken risk appetite. Meanwhile, the energy crisis in Europe is getting worse – the Nord Stream 1 pipeline has been out of service for several weeks, and the surge in energy prices in Europe, even before winter has arrived, could cause the bloc to fall into a recession. Given this economic landscape, the outlook for the euro is dim indeed.
- EUR/USD is testing support at 0.9800. Next, there is support at 0.9654
- There is resistance at 0.9907 and 1.0053
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