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The market is heavily heading towards safe havens, and the EUR/USD pair has broken through the 1.0800 handle. The Euro is expected to fall against the US dollar for a fifth day in a row. Even better-than-expected Eurozone economic data was easily ignored by most market players.
With the Euro falling 0.65% peak-to-trough versus the US dollar, the EUR/USD is down about four tenths of a percent on Tuesday as investors see new risk-off flows into safe havens.
Early on Tuesday, the eurozone’s economic data beat the street in general. However, sentiment flows dominated the main forex charts, and data releases had little effect because most investors were seeing a decline in their appetite for risk in the wake of Moody’s downgrade of China’s credit.
The Euro touched the chart paper below 1.0800 on Tuesday during its selloff, but as the trading day draws to an end, the pair is beginning to rebalance.
The November reading of the Eurozone HCOB Composite Purchasing Managers’ Index (PMI) was 47.6 MoM, which was higher than the forecasted reading of 47.1 from October.
The tight US labour market contributed to JOLTS Job Openings falling to a two-and-a-half-year low, and the Institute for Supply Management’s (ISM) Services PMI for November came in higher than expected at 52.7, compared to the market’s median forecast of 52.0 versus October’s 51.8. These US data furthered the overall negative sentiment surrounding the market.
The US economy is too tight for the Federal Reserve (Fed) to even consider a rate-cut cycle, as evidenced by the US services sector, which is one of the major contributors to the US GDP, continuing to show a firm healthy trend. Additionally, there are fewer jobs available in the labour market. A strengthening US economy pushes rate cut expectations further out, and good news is bad news for markets burdened with rising borrowing and financing costs on the back of higher interest rates. Investors are generally hungry for an accelerated path towards declining interest rates.
Eurozone retail sales are expected to increase on Wednesday, but they will still come in below expectations. They are expected to go from -2.9% to -1.1% for the annualised period ending in October.
The third quarter is predicted to remain unchanged at 0.1% YoY. On Thursday, the Eurozone will release its GDP data. On Friday, the trading week will come to an end with a report on US nonfarm payrolls (NFP), which is anticipated to rise from 150K to 185K.
Technically speaking, the EUR/USD pair is down for the fifth day in a row after falling below 1.0800 on Tuesday. The Euro is also down slightly more than 2% from its peak bids near 1.1020 last week.
The EUR/USD is breaking through the 200-day Simple Moving Average (SMA), which is presently hovering around 1.0820, as a result of the Euro’s downturn. In the event that bearish pressure persists, bidders will attempt to stage a recovery back over the 200-day SMA before the EUR/USD dips too far into retracement territory between 1.0750 and 1.0700. The 50-day SMA has turned bullish and is rising into the 1.0700 handle.
