EUR/USD continues to trade at seven-week lows as sellers maintain control
Price broke away from rangebound trading in the two past two weeks between 1.1200-80 and hasn’t really looked back since. The move to the downside came via a bout of strength in the dollar yesterday and it sees the pair trade at seven-week lows now. Price action today is more subdued as the pair trades in a 15 pips range so far but let’s see what euro area PMI data has to offer later and whether that has the potential to shake things up ahead of the ECB meeting decision tomorrow.
Looking at the bigger picture, price managed to firmly break below daily support around 1.1177-84 yesterday. That puts minor support around 1.1135 in focus next before sellers will potentially start looking for a test of the year’s lows around 1.1107-18.
Currently, the OIS market has odds of a 10 bps rate cut tomorrow at about 42%. Should PMI data later disappoint heavily, expect those odds to increase and result in further downside pressure in EUR/USD towards the year’s lows.
On the flip side, I don’t see a material shift in expectations in the event that the data comes out to be more solid. The euro area’s struggles are plain for all to see and with the Fed set to ease, the ECB will have no choice but to follow suit as well in due time.