Euro falls as data points to slowing growth in Europe
The euro declined against the US dollar as investors reacted to weak economic data from the European Union. According to a study by Markit, the services PMI dropped to 50.5 in August from the previous 54.7. Analysts polled by Reuters were expecting the PMI to fall to 50.1. Meanwhile, the composite PMI declined from the July high of 54.9 to 51.9. Other data by Eurostat showed that the volume of retail sales cooled in July. The sales dropped by 1.3% on a year-on-year basis after rising by 5.3% in the previous month. In general, these numbers show that the Eurozone economic growth is moderating after seeing robust growth in June.
The US dollar strengthened against major currencies as traders continued to bet on a stronger recovery of the US economy. This followed relatively strong manufacturing PMI, factory orders, and employment numbers from the US. Yesterday, data released by ADP Research Institute showed that private companies employed more than 400K people in August. These numbers came two days before the official numbers from the Bureau of Labour Statistics.
Meanwhile, the dollar reacted to better initial jobless claims data from the US. The initial jobless claims increased by 881K in the previous month while the continuing claims fell to 13.2 million. In August, the US exported goods worth more than $168 billion and imported goods worth $231 billion.
The British pound dropped against the US dollar as traders reacted to the strong services and composite PMI data from the UK. According to Markit and the Chartered Institute of Purchasing and Supply (CIPS), the services PMI increased from 56.5 in July to 58.8 in August. The composite PMI rose to 59.1 from the previous 57.0. These numbers show that the UK economy is making steady progress. Just yesterday, data from Nationwide showed that the house price index rose by 3.7% and 2.0% on a YoY and MoM basis, respectively. On Tuesday, data from the Bank of England showed that more than 66k mortgages were approved in August.
The EUR/USD pair declined to an intraday low of 1.1800. On the four-hour chart, the price moved below the lower line of the channel that is shown in yellow. The price has also moved below the 50-day and 100-day exponential moving averages while the RSI has continued to fall. Therefore, by dropping below this support, it means that bears are prevailing, which means that the pair is likely to continue falling as bears target the support at 1.1750.
The GBP/USD pair dropped to an intraday low of 1.3238, which is slightly above the 50-day and 100-day moving averages. On the four-hour chart, the price is significantly below the year-to-date high of 1.3480. The signal line of the MACD has also made a bearish crossover. Also, the price is above the ascending trend line that connects the lowest level on June 30, July 20, and August 25. Therefore, the pair is likely to continue falling as bears target this ascending trendline.
The XBR/USD pair dropped to an intraday low of 43.05 even after the weak crude oil inventories data from the United States. On the daily chart, the price has moved below the rising wedge pattern. It is also between the 38.2% and 50% Fibonacci retracement level. The price also seems to be moving below the two moving averages. Therefore, there is a possibility that the price will continue falling as bears target the next support at 40.00.