Euro slides lower after worse than expected manufacturing data
The euro currency has started to come under pressure against the US Dollar after the latest EU PMI manufacturing data came in weaker than most economists had been predicting. Leading up to the PMI manufacturing release, expectations had been high that European manufacturing activity would start to pick-up during April.
As well as the weaker than expected 47.8 PMI reading for the entire eurozone, the German manufacturing PMI remained particularly weak, with a 44.5 headline reading for the month of April. Investors pay close to attention to PMI manufacturing data, with a below 50.00 reading pointing to actual economic contraction.
The only bright spot inside the report was the German services PMI, which showed that the service sector remained fairly robust inside the German economy during the month of April. The overall EU services PMI came in weaker than expected, with a disappointing 52.5 headline reading.
The scene is now set for the next European Central Bank policy meeting on June 6th, where the ECB may be forced to act if the manufacturing and services sector PMI readings remain at depressed levels. The June 6th policy meeting also takes on extra importance as the ECB will deliver their latest economic projections.
The EUR/USD fell sharply on the weaker than expected data as it became clear that EU economic activity remains at depressed levels and is showing no clear sign of a stabilizing, despite encouraging signs coming from the Chinese economy. The EUR/USD pair had been trading in its narrowest weekly price range of the year prior to the April PMI data releases.
EUR/USD Daily Mountain Chart | Source: ActivTrader
The EUR/USD pair remains technically weak while trading below the 1.1250 level, further downside pressure is expected if the 1.1216 support level if broken. Following the strong rejection from the 1.1300 level, the daily time frame is also showing a bearish head and shoulders pattern with the breakdown point for the pattern located at the 1.1175 level.
Written by Nathan Batchelor, External Analyst
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