Euro bombs as manufacturing falls to historic low
Global stocks tumbled today as the market reacted to the new geopolitical tensions between the United States and China. In Europe, the DAX, FTSE 100, and CAC dropped by 3.30%, 0.25%, and 3.86% respectively. In Asia, the Hang Seng fell by almost 4% while in the United States, futures tied to the Dow Jones and S&P500 declined by more than 1%. Over the weekend, Mike Pompeo said that the US had found evidence that the coronavirus pandemic was manufactured in China. This followed a previous statement by Donald Trump, who said he had seen the evidence. Still, none of the two provided any evidence. The new claims risk opening a new trade war between the two countries.
The euro declined against the USD as the market reacted to the new manufacturing PMI data from Europe. Data from the Markit showed that the German manufacturing PMI dropped to a low of 34.5 in April down from the previous 45.4. Similarly, the PMI dropped to 31.5 in France and 31.1 in Italy. In the eurozone, data showed that the PMI dropped to a record low of 33.4 from the previous 44.5. While the numbers were bad, Markit said that activity would improve in May barring any second wave of the disease. Other weak PMIs were from Switzerland, Norway, South Africa, and the United States.
The price of crude oil declined mostly because of the ongoing trade tensions. The price ignored some positive data from the oil market. For example, oil producers have already started slashing production as was agreed in the OPEC+ meeting in April. In addition, data from Baker Hughes showed that the number of oil wells in the United States dropped to a record low of 320 in the previous week. In contrast, there were more than 600 active wells in January. Another positive is that many economies have started to reopen. This means that we could start seeing an uptick of demand.
The EUR/USD pair declined slightly following the weak manufacturing PMI data released from Europe. The pair reached an intraday low of 1.0922, which was the lowest it has been since Thursday last week. The price is slightly below the 23.6% Fibonacci retracement level and below the 14-day and 28-day exponential moving averages. The RSI has also continued to decline, hitting an intraday low of 35 today. The pair may continue declining as bears attempt to hit the 38.2% retracement level at 1.0905.
The AUD/USD pair wobbled today as the market reacted to the new tensions between the US and China. The pair reached a low of 0.6372, which is along the 23.6% Fibonacci retracement level on the daily chart. The price is along the 14-day exponential moving averages and slightly above the 28-day EMA. The RSI has also moved from the oversold level of 18.37 to the current 47.45. The pair is forming a bearish flag pattern, which means that there is a likelihood that the downward trend will continue.
The S&P500 index declined to an intraday low of $2,781, which is slightly below the short and medium-term moving averages on the four-hour chart. The price is along the 50% Fibonacci retracement level while the RSI has been moving downwards. The pair may continue falling as bears attempt to retest the important support at $2,722.