03/10/2024
Written by: Ian Morley
GBP/EUR
Summary:
The GBP/EUR pair saw bearish momentum intensify last week, with the Euro under pressure following weak German and Eurozone PMI data. German Manufacturing PMI fell to 40.3, while the Services PMI also disappointed at 50.6. This worsened the outlook for the Eurozone, further exacerbating losses against the Pound. EUR/GBP closed lower at 0.8385 as technical indicators signalled an oversold market, with RSI dipping below 35. The ongoing sell-off led to a test of the 0.8380 support level.
Outlook:
The outlook for EUR/GBP remains bearish, with the next key support levels at 0.8350 and 0.8330. A break below these levels could indicate further downside, while resistance is seen at 0.8420. On the Euro side, more data from Germany and the Eurozone may offer some relief, but the current trend favours a weaker Euro, particularly if economic data continues to underperform. The Pound may benefit from steady UK economic performance but watch for PMI data for additional clues.
EUR/USD
Summary:
The EUR/USD pair fell sharply towards the 1.1100 level as disappointing German and Eurozone PMI figures put downward pressure on the Euro. German Manufacturing PMI came in well below expectations at 40.3, marking a yearly low. Services PMI also disappointed, dropping to 50.6. The Eurozone-wide PMI mirrored this weakness, with the Manufacturing PMI falling to 44.8. These figures contributed to a risk-off sentiment, which strengthened the US Dollar.
Outlook:
EUR/USD remains vulnerable to further downside, especially if upcoming PMI data from the US surprises positively. The pair is likely to test the 1.1100 support level again. A break below could trigger further selling, targeting the 1.1050 region. On the upside, resistance is seen at 1.1160, but sustained Euro strength seems unlikely without a substantial improvement in Eurozone data.
GBP/USD
Summary:
The GBP/USD pair weakened slightly below the 1.3350 mark following the recovery of the US Dollar. Market participants remain cautious ahead of US PMI data, which could provide a more accurate picture of the US economy. The Federal Reserve’s rate cut speculation has continued to weigh on the Dollar, but Fed Chair Jerome Powell remains cautious about inflation. In the UK, PMI data also drew attention, and any surprises could provide short-term volatility.
Outlook:
While GBP/USD is likely to experience some volatility, particularly with US PMI data on the horizon, the pair remains supported by the ongoing uncertainty in the US economy. Further upside could push the pair towards the 1.3400 mark, while downside risks remain limited unless US economic data significantly improves. Key support levels lie at 1.3310 and 1.3280.
AUD/USD
Summary:
The AUD/USD pair saw mild gains last week as optimism around China’s economic recovery provided a boost to the Australian Dollar. The People’s Bank of China (PBoC) injected liquidity into the financial system, helping the AUD to appreciate despite weaker domestic PMI data. However, the upcoming RBA meeting could add some volatility, with expectations that rates will remain unchanged at 4.35%.
Outlook:
With global risk sentiment improving, AUD/USD could see further upside, testing resistance at 0.6850. Support is seen at 0.6800, and the pair could consolidate in the near term if the Reserve Bank of Australia confirms market expectations by keeping interest rates steady. However, any surprise moves by the RBA could lead to increased volatility.
USD/CAD
Summary:
The USD/CAD pair held above 1.3550, supported by rising US Treasury yields. Meanwhile, higher crude oil prices due to tensions in the Middle East provided support to the Canadian Dollar. Canadian Retail Sales data also exceeded expectations, adding to CAD strength. However, the market continues to price in the possibility of a Fed rate cut by the end of 2024, which may weigh on the US Dollar.
Outlook:
USD/CAD may remain range-bound, with upside limited by rising crude oil prices and strong Canadian retail data. Resistance lies at 1.3600, while support can be found at 1.3500. The pair’s movement will likely be driven by oil prices and broader USD sentiment in response to Fed communications.
Final Summary:
Overall, the currency markets have seen the Euro underperform across several pairs as disappointing PMI data from Germany and the Eurozone adds to the pressure. Meanwhile, the US Dollar has found some strength due to its safe-haven appeal amidst geopolitical concerns, although further Fed rate cuts remain in focus. The Australian and Canadian Dollars have shown resilience, bolstered by China’s economic recovery and higher oil prices, respectively. In the short term, PMI data and central bank decisions will play pivotal roles in shaping currency movements.