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EUR/USD Tumbles To New 2-Year Low, More Downsides Ahead

Aayush Jindal

Aayush Jindal

Key Highlights

  • The Euro extended its decline and traded below1.1000 against the US Dollar.
  • EUR/USD might correct higher, but most likely tostruggle near 1.1020 and 1.1050.
  • The Caixin China Manufacturing PMI increasedfrom 49.9 to 50.4 in August 2019.
  • The Euro Zone Manufacturing PMI is likely toremain flat near 47.0 in August 2019.

EUR/USD Technical Analysis

This past week, we discussed the chances of more downsides in the Euro below 1.1050 against the US Dollar. The EUR/USD pair did decline below 1.1050 and even traded to a new 2-year low below 1.1000.

EUR/USD Technical Analysis Euro US Dollar

Looking at the 4-hours chart, the pair traded as low as1.0963 and it is currently consolidating losses. An immediate resistance on theupside is near the 1.1000 level.

The first key resistance is near 1.1010 plus the 23.6% Fibretracement level of the downward move from the 1.1163 high to 1.0963 low. Thenext key resistance is near the 1.1030 level (the previous support area).

Moreover, there is a connecting bearish trend line formingwith resistance near 1.1030 on the same chart. Above the trend line, the paircould recover towards the 1.1060 resistance area. It coincides with the 50% Fibretracement level of the downward move from the 1.1163 high to 1.0963 low.

On the downside, an initial support is near the 1.0965,below which EUR/USD might continue to decline towards the 1.0950 and 1.0920support levels in the near term.

Fundamentally, the Caixin China Manufacturing PMI for August2019 was released by Markit Economics. The market was looking for a minordecline from the last reading of 49.9 to 49.8.

The actual result was better than the forecast, as the CaixinChina Manufacturing PMI increased to 50.4 in August 2019. It seems like operatingconditions faced by Chinese manufacturers improved slightly.

The report added:

New order intakes were meanwhile broadly stable, despite a faster decline in export sales. The improved production trend led firms to expand their purchasing activity further, while stocks of finished goods rose for the first time this year to date.

Overall, EUR/USD might correct higher, but it is likely to face hurdles near 1.1020, 1.1050 and 1.1060. Similarly, GBP/USD is facing an uphill task and it could decline below the key 1.2150 support.

Upcoming Economic Releases

  • Germany’s Manufacturing PMI for August 2019 -Forecast 43.6, versus 43.6 previous.
  • Euro Zone Manufacturing PMI August 2019 –Forecast 47.0, versus 47.0 previous.
  • UK Manufacturing PMI for August 2019 – Forecast 48.4,versus 48.0 previous.