EUR/USD, FTSE Forecast: Two Trades to Watch

EUR/USD looks PMI data

• Eurozone composite PMI to fall to 47 vs 48.9
• ECB chatter in focus
• EUR/USD breaks down descending triangle

EUR/USD is falling away from 1.08 after two days of gains as the US returns from the Labour Day bank holiday and as investors look ahead to eurozone PMI data.

The services PMI is expected to fall to 48.3 in August down from 50. 9 and the composite PMI is expected to fall to 47 in August down from 48.6.

The data comes after these finalised manufacturing PMI's at the end of last week which showed that the sector contracted for a fourteenth straight month and that new orders tumbled.

Also in focus will be eurozone PPI data which is expected to show a sharp decline falling 7.6% YoY down from 3.4%.

The data comes after ECB chief economist Philip Lane praised the softening of August inflation data but noted that more data was needed

ECB president Christine Lagarde also spoke on Monday and highlighted the need for central banks to keep inflation expectations anchored. However she gave few clues on the ECB's likely move for interest rates in the September meeting. While inflation is still high there are clear signs that the economy is slowing, raising questions over how much further the ECB will hike rates. Lagarde is due to speak again shortly.

Meanwhile the USD is pushing higher supported by hawkish Federal Reserve commentary and amid a risk off mood.

US factory orders are due to be released later and are expected to show that orders fell -2.5% YoY from 2.3%.

EUR/USD forecast – technical analysis

EUR/USD is breaking down its descending triangle. The pair has fallen below the 200 sma to a 12-week low, taking out 1.07660 the descending triangle support. The RSI below 50 also keeps sellers hopeful of further losses.

The move lower brings 1.0635, the May low into play.

Meanwhile, 1.0830 is a key level for buyers which is a confluence of the 200 sma and the falling trendline resistance. A rise above here and the 20 sma at 1.0875 brings 1.0935 last week’s high into play.

 

FTSE tumbles on China concerns

• Chinese services PMI slips to 51.8 from 54.1
• UK services PMI to confirm contraction
• FTSE break below rising trendline

The FTSE 100 is falling sharply lower after weaker-than-expected data from China drives risk-off trade.

The latest Chinese service PMI showed that the sector grew at a much slower pace than expected in August at 51.8 down from 54.1. The data raises concerns over the health of the world’s largest economy and suggests that recent stimulus has done little to boost consumption.

UK service sector data will also be in focus and is expected to confirm the preliminary reading of 48.7 down from 51.5.

Miners and luxury retailers that look to China for growth are trading under pressure.

Separately, Barclays data also showed that UK consumer spending growth slowed last month. As a result retailers are declining.

FTSE forecast – technical outlook

After running into resistance at 7525, the FTSE has rebounded lower, breaking below the rising trendline support and the 20 sma at 7405. This combined with a receding bearish bias on the MACD keeps sellers hopeful of further downside.

Support could be found around 7300 round number ahead of 7215 the August low.

Buyers will look to rise above 4335 the rising trendline resistance and 7480 the 50 sma ahead of 7525 the September high.