Euro falls after European services and manufacturing collapse in April

The euro index declined as investors reacted to the weak manufacturing PMI data from the region. According to Markit, manufacturing and services activities collapsed in April as countries implemented lockdowns to fight the coronavirus pandemic. The manufacturing PMI dropped to 33.6 from the previous 44.5 while the services PMI dropped from the previous 26.4 to 11.7. These were the worst numbers in decades. In Germany and France, the manufacturing PMI dropped to 34.4 and 31.5 respectively. Investors also reacted to the ongoing differences between EU leaders on how to fund the bloc’s recovery. Some countries like France and Italy advocate for a joint fundraising which is opposed by Germany and other northern countries.

The Japanese yen strengthened slightly against the US dollar even as the manufacturing activity in the country dropped. Flash data released earlier today showed that manufacturing PMI declined to 43.7 in April. This was a slight decline from the previous month’s 44.8. Data also showed that the services sector PMI dropped from the previous 33.8 to a low of 22.8. The real PMI data will probably be worse when it is released in May because it will factor the current state of emergency.

The US dollar strengthened slightly even after more disappointing data from the United States. Data from the Labour Department showed that initial jobless claims data rose by more than 4.4 million in the previous week. This brought the total number of people who have filed for these claims in the past five weeks to more than 26 million. Analysts surveyed by Bloomberg were expecting the claims to come in at around 4.2 million. The lagging continuing jobless claims numbers rose from more than 11 million last week to 15.9 million. We will receive US manufacturing PMI and new home sales data later today.

XBR/USD

The XBR/USD pair rose to an intraday high of 26.65, which is slightly above the 38.2% Fibonacci Retracement level on the hourly chart. The price is slightly above the 14-day and 28-day exponential moving averages while the RSI has been rising too. Also, the price is attempting to emerge from the Ichimoku cloud. Therefore, the upward trend will continue if the pair manages to move above the cloud. Alternatively, the pair may move lower and possibly retest the 23.6% retracement level at 23.50.

USD/JPY

The USD/JPY pair declined to an intraday low of 107.45 even after the disappointing PMI data from Japan. On the hourly chart, the price is slightly below the 14-day and 28-day exponential moving averages. It is also between the 107.88 and 107.27 channel that has been forming throughout the week. Also, it is slightly below the 23.6% Fibonacci retracement level. The pair may continue moving lower as it attempts to test the important support at 107.27.

EUR/USD

The EUR/USD pair declined to an intraday low of 1.0755 following the weak PMI data from Europe. On the hourly chart, the pair is below the short and medium-term moving averages. It has also formed a bullish Doji pattern, which is usually a sign that a new upward trend is forming. Therefore, the pair may move higher and retest the 23.6% Fibonacci retracement level at 1.0810 after the new home sales and manufacturing PMI data.