The US manufacturing PMI exceeded expectations, while the services PMI fell short. This is the first time in 9 years that the service industry has seen a drop in activity. US10Y bond yields took a dive, taking the US dollar index with it.
Day’s news (GMT 3):
- 11:00 Germany: IFO – business climate (Sep), IFO – current assessment (Sep), IFO – expectations (Sep).
- 11:30 UK: public sector net borrowing (Aug).
- 16:00 US: S&P/Case-Shiller home price indices (Jul).
- 17:00 US: consumer confidence, Richmond Fed manufacturing index (Sep).
At the time of writing, the euro is trading at 1.0990. Judging by the formation drawn from the 1.1073 top, it seems that the pair is set to continue downwards. Following a sharp drop to 1.0966, it’s possible that the pair will continue to consolidate below the balance line.
If the bears don’t hit fresh lows, the pair could at least return to 1.0966 if the euro crosses decline. In our forecast, we’re predicting a drop to 1.0970. Even a pullback to 1.0975 will fulfill the conditions for a correction.
ECB President Draghi said yesterday that there are no signs of either recovery or decline in the Eurozone’s manufacturing sector. This could have a negative effect on the wider economy. Draghi’s remarks are likely to hold the bulls back this week.
If the price moves as forecasted, we could get a double base with a target of 1.1040.