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EUR/USD: New 2019 low likely despite disappointing US data

The EUR/USD has been limping since it made a post-ECB high of 1.1110 nearly two weeks ago. After rallying on the back of ECB’s expected decision to re-introduce QE and cut rates to negative, rates have struggled to show any further bullish momentum. It all makes sense. After all, Germany is on the brink of a recession. Inflationary pressures are falling. Brexit uncertainty is rising. Need we any more reasons? Today, though, there was a bit of relief for the single currency as the latest German data was not too bad, while US macro pointers disappointed expectations. The bulls would also take heart from the fact the exchange rate hasn’t broken sharply lower in the face of those very poor German PMI numbers form yesterday. On balance, however, the path of least resistance still remains to the downside because of greater macro concerns over the Eurozone than the US economy.

The exchange rate tested waters above the $1.10 handle in reaction to the German IFO survey, which beat on the “current assessment” front (which came in at 98.5 vs. 96.9 expected and 97.4 prior), but the “expectations” index disappointed (falling to 90.8 vs. 92 expected, down from 91.3 previously). On top of this, the Richmond Fed Manufacturing Index came in sharply below expectations at -9 for September versus +1 expected and last. What’s more, the Conference Board reported a sharp drop in consumer confidence: to 125.1 from 135.1 when a reading of 134.1 was expected.

But with the Eurozone PMIs and German Ifo survey out of the way, there isn’t much in the way of major Eurozone data left for this popular pair this week. However, we will have more second-tier US macro numbers to look forward to as the week progresses.  If, on the whole, these figures suggest the US economy is continuing to expand at a steady pace, then the greenback could find renewed bullish momentum and that could undermine the EUR/USD exchange rate. However, if today’s data is anything to go by and we further soft US macro pointers, then in that case the EUR/USD could find some much-needed support.

Source: eSignal and City Index.

From a technical point of view, the fact that the EUR/USD is struggling to show any sort of strength is not exactly bullish is it? With rates continuing to make lower lows and lower highs, the pressure is growing. You get a feeling that all it needs is just a little push to trigger a few stops and ignite momentum selling. I continue to believe that liquidity below the post-ECB low at 1.0925 will be taken out soon. For avoidance of doubt, I am bearish until told otherwise by bullish price action.


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