EURUSD, H1
Eurozone Composite PMI nudged marginally higher in August, indicating that the recovery is ticking along, but also that the pace of expansion remains modest with trade jitters increasingly weighing on the manufacturing sector. The manufacturing output PMI moved slightly in August, but the overall Manufacturing PMI dropped to a 21-month low of 54.6 from 55.1 in the previous month. The Services Index meanwhile improved to a 2-month high of 54.4 from 54.2 in July. The stock of unfilled orders is shrinking as new orders growth remains low compared to levels seen earlier in the cycle. So far the labour market has not been affected – employment growth hit a six-month high and is still running close to survey record rates. This was entirely driven by the services sector, however, with factor payroll growth slipping to a 17-month low. Meanwhile, higher wage growth and increased fuel, transport and commodity prices continue to contribute to elevated price levels. Overall then, the picture remains of continuing positive growth dynamics in the near term, with the services sector increasingly taking over as the main driver of consumption. Warning signs are flashing, however, and the balance of risks is steadily tilting towards the downside, given a medium term outlook of slowing growth amid elevated prices. Not a comfortable picture for ECB as it is preparing to phase out net asset purchases.
EURUSD moved down significantly overnight to post an Asian session low at 1.1542. The Eurozone PMI data helped the pair to a London top at 1.1574 before the USD found some traction and the pair moved lower, currently oscillating around the daily S1 level at 1.1558. Next Support is the lower Bollinger Band at 1.1532 and S2 at 1.1522. Initial Resistance sits on the 20 period moving average at 1.1577, the daily Pivot at 1.1590 and then R1 and the Fractal highs at 1.1625.