Euro runs out of comfort as PMI data highlights continued decline

The latest set of PMI figures for October only serve to reaffirm an escalating slowdown in the Eurozone as conditions continue to be largely hampered by high inflation and cost of living concerns. The prospect of a recession continues to draw closer and the only comfort really is that the weather has been relatively mild for the start of winter, at least for now.

But given the circumstances, the outlook remains bleak as the ECB continues to struggle to cope with high inflation – which continues to be a major problem for the economy. Add to that the energy crisis and the fact that things are not expected to improve next year and serious doubts arise as to how policymakers and lawmakers will be able to find a solution in the months to come.

The Euro may have gotten some breathing room at the end of last week amid a weaker Dollar, but the chart is less than convincing, even if the buyers are currently in control in the short term.

EUR/USD is hovering near the day’s lows around 0.9820 and while there are significant option expiries in play for the pair, it’s hard to say that the path of least resistance is still likely to fall.

The divergence between the economic health of Europe and the United States is a factor at play – at least in terms of progress – and that only adds to the aggressiveness of either central banks. The Fed appears to be the most forceful in this case and with growing concerns over the state of the Eurozone economy, doubts are creeping in as to whether the ECB can continue its tightening path.

For now, the 100 hourly moving average (red line) and 200 hourly moving average (blue line) at 0.9810 and 0.9779 will act as key short-term support levels before reaching the line. trendline (white line) just below 0.9700. This is the region where buyers will have to defend themselves or risk another retreat with the ECB and the Fed taking center stage this week and next.


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