EURUSD drops 0.3% amid mixed economic signals from US and Germany

EURUSD Analysis

Performance after Monday
Period	Pct	Chg	Momentum
Monday	-0.3%	-33.6 Pips
Week to-date	-0.3%	-33.6 Pips
September	0.55%	60.4 Pips

Upcoming key events (London Time)

Tue 10:00 AM EUR Core Harmonised Index of Consumer Prices (HICP) (12-mth)

What happened lately

In the United States, the Chicago Purchasing Managers’ Index (PMI) for September increased to 46.6 points from 46.1 points in August. The rise in the PMI can indicate a slight improvement in the economic activity within the manufacturing sector, although the index is still below the critical threshold of 50, which signals contraction. This modest uptick offers a somewhat positive outlook for the U.S. economy, although it remains in a precarious state.

Regarding Germany, the latest data on inflation presents a mixed but generally slowing inflationary trend. The flash estimate for the Harmonised Index of Consumer Prices (HICP) in September reported a year-over-year rate of 1.8%, down from 2% in August, according to Destatis. Additionally, Germany’s CPI inflation rate, based on the same flash estimate, showed a slight increase to 0% in September from -0.1% in August, and the one-month HICP improved marginally to -0.1% from -0.2%. Moreover, the CPI inflation rate for the 12-month period dropped to 1.6%, down from 1.9% in August. These figures indicate that while there is a slight monthly improvement, the overall consumer price inflation continues to decelerate on a yearly basis.

The reported economic data suggest a contrasting economic climate between the U.S. and Germany, where the former shows slight activity improvement, whereas the latter indicates a diminishing inflationary pressure scenario. The effects on the EURUSD currency pair are perceivable, with EURUSD dropping by 0.3% to 1.11408 on Monday, though the pair ended the month higher by 0.55%. The recent U.S. data might add mild support to the USD, hampering EUR’s strength further, especially in the context of the upcoming high-impact release of the Eurozone Core Harmonised Index of Consumer Prices (HICP), which could provide additional volatility to the pair. If European inflation data disappoints, as Germany’s numbers suggest, downward pressure on EUR could persist, pressurizing EURUSD lower. Conversely, stronger-than-expected Eurozone data might offer a stabilizing or upward influence on the pair.

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What can we expect from EURUSD today?

EURUSD on Monday dropped -0.3% to 1.11408. Price is below 9-Day EMA while Stochastic is falling.

Updated daily direction for EURUSD looks bearish as the pair posted lower in Monday trading session.

Looking ahead for the day, immediate support level is at S1 1.10997 with break below could see further selling pressure towards S2 at 1.10586. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.12089 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.11132 would indicate selling pressure.

For the week to-date, take note that EURUSD is mixed as compared to the prior week.

EURUSD ended month of September trading session up by 0.55% or 60.4 pips higher.

Key levels to watch out:

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