- EUR PMI results fall below expectations
- US Flash Services PMI results remain strong, manufacturing PMIs weaken
- FOMC members are open to more significant rate cuts
- Middle East tensions fortify grounds for haven investments
- Technical Analysis: DXY, EURUSD, Gold
PMI Results
On Monday, flash manufacturing and services PMI across France, Germany, the Eurozone, the UK, and the US showed disappointing results. German business activity fell at the fastest rate in seven months, while French economic activity also slowed following the Olympics. With this cooling trend, dovish monetary policies are likely in the next ECB meeting. ECB President Lagarde’s speech on Thursday could provide further insights.
FOMC Member Insights
With labor market worries in the headlines, alongside the rate cut magnitude that reflected more than anticipated weakness in the US economy, FOMC members are open to further easing given the contractionary impact of the current rates.
This Friday’s US Core PCE alongside next Friday’s US Non-farm payrolls can alter the views and expectations for the next policy. FOMC member Goolsbee noted that labor market deterioration can happen faster than central banks can respond, increasing the likelihood of large-scale rate cuts unless economic data improves significantly.
EURUSD, DXY Analysis: 3 Day Time Frame – Log Scale
Source: Tradingview
Both the EURUSD and the DXY are consolidating ahead of a potential breakout or reversal. The DXY is torn between haven demand and a dovish Fed, while the EURUSD is trading near its highs despite weak PMI data and a stable Dollar (for now). With the US elections looming, market uncertainty is high, and gold continues to rise as a safe-haven investment.
EURUSD Analysis: Weekly Time Frame – Log Scale
Source: Tradingview
The EURUSD remains stable near 1.12, needing additional momentum to continue its upward trend. Since the 2022 lows, the pair has been showing a bullish bias, but a breakout above 1.12 and 1.13 is needed to confirm the continuation of this trend.
Bullish Scenario: A break above 1.12 and 1.13 could push the pair towards the 1.15 zone.
Bearish Scenario: Support lies between 1.10 and 1.09. A drop back into the consolidation range could signal a bearish move towards 1.0780 and 1.0680.
Gold Analysis: 3 Day Time Frame – Log Scale
Source: Tradingview
Gold has been in a strong uptrend, respecting the boundaries of its ascending parallel channel since the Israel-Hamas conflict began in October 2023. As we near the one-year mark of the war, gold continues to be viewed as a safe-haven asset, bolstered by the uncertainty surrounding the dollar, upcoming US elections, and developing geo-political conflicts.
Bullish Scenario: Gold has upside potential towards $3,000, with potential key resistance levels above 2660 at 2,710, 2,760, and 2,890.
Bearish Scenario: A pullback from current highs could find support at 2,580, 2,540, and 2,500. In a more extreme case, a break below 2,470 could see gold testing the June 2024 lows near 2,300.
--- Written by Razan Hilal, CMT - on X: @Rh_waves
