EUR/USD improves to two-week high

The euro has posted gains on Tuesday. In the North American session, EUR/USD is trading at 1.0847, down 0.40% on the day at the time of writing.

In the US, today’s data was a disappointment. Existing Home Sales fell 5.4% in July to 3.89 million, the sharpest monthly decline since 2022 and a fourth monthly decline. The Richmond Manufacturing index declined to -17 in July, down from -10 in June and the lowest level since May 2020. Both readings missed expectations. There are no European releases on the schedule.

Eurozone PMIs expected to be a yawner

On Wednesday, the eurozone will release the July PMI reports for the services and manufacturing sectors. The markets aren’t expecting much change from the June releases. Manufacturing has been in a prolonged depression and hasn’t shown growth since June 2022. The market estimate for July is 46.1, compared to the June release of 45.8.

The services sector, which has carried the economy, is in better shape than manufacturing and has posted four straight months of growth. The market estimate for July stands at 52.9, a notch higher than the June reading of 52.8. The 50.0 line separates contraction from expansion.

The European Central Bank held rates last week and ECB President Lagarde said that the September meeting was “wide open”. ECB vice-president Luis de Guindos said today that the central bank held rates last week because it would have inflation and other data in September.

Guindos cautioned that the level of uncertainty is “huge” but underlying inflation indicators are pointing downward. The ECB made an initial rate cut in June and the markets are expecting one or two more rate cuts before the end of the year but ECB officials remain cautious, especially after lowering rates in June.
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EUR/USD Technical

• EUR/USD is testing support at 1.0854. Below, there is support at 1.0825
• 1.0901 and 1.0931 are the next resistance lines

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