EUR/USD supported by better-than-expected Eurozone PMIs, weak US dollar

EUR/USD Powered by Better-Than-Expected Euro PMI area, Weak US dollar

• Eurozone composite PMI beats expectations, but caution is needed
• German manufacturing problems continue
• Can Powell Support a Struggling US Dollar?

Eurozone economic activity picked up in August, according to the latest HCOB PMIs, but a closer look at the numbers “reveals that the underlying fundamentals may be shakier than they appear”, according to HCOB Chief Economist Dr Cyrus of Blonde. .

“It’s a tale of two worlds. The manufacturing sector remains stuck in recession, while the service sector appears to be still growing at a decent pace. But with France’s temporary Olympic boost fading and signs of declining confidence in the Eurozone’s services industry, it is likely only a matter of time before the manufacturing sector’s struggles begin to affect services as well.”

The euro hit a fresh 13-month high against the US dollar on Monday and remains within striking distance of another high today. The US dollar remains weak as the Federal Reserve prepares a series of interest rate cuts expected to begin in September. Fed Chairman Jerome Powell’s appearance at the Jackson Hole Symposium on Friday could give the market a better understanding of the central bank’s current thinking and the expected pace of rate cuts going forward.

Today’s EUR/USD price action is likely to remain in the Monday range – 1.1099-1.1174 – with yesterday’s high much more likely to be tested.

EUR/USD daily chart

Chart using TradingView

Retail trader data shows that 22.77% of traders are net-long, with the ratio of short-long traders at 3.39 to 1. The number of net-long traders is 5.47% lower than yesterday and 23, 95% lower than last week, while Traders net-short number is 1.73% higher than yesterday and 7.93% higher than last week.

We typically take a contrary view to crowd sentiment, and the fact that traders are net-short suggests that EUR/USD prices could continue to rise. Traders are higher than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD countertrend.