EUR/USD Analysis: Key Support Zone Resists Selling Pressure

FXOpen -

Today, fresh monthly values of the PMI index, which is considered a leading indicator of the state of the economy, have become known:

  • France: actual 43.6, expected 46.2. This is the worst economic contraction since the coronavirus.
  • Germany: actual 39.8, expected 39.5.

As a reminder, values below 50 indicate a slowing economy.

Thus, the PMI witnessed the worsening economic problems in the European Union. And not only. The PMI indicator for the UK also published today was 44.2, which, although higher than the previous value 42.5, is still below 50.

The euro immediately reacted to the disappointing news. The exchange rate against the dollar fell to its lowest level in six months. However, then an encouraging recovery followed — apparently, the proximity of the rate to the key support zone had an effect.

Bullish arguments:

  • The price is in a range that has started in the first half of the year. There, the bears had several attempts to establish a downward trend, but failed. The price has been holding above this zone since the end of March.
  • Yesterday’s candlestick was formed with a long lower shadow – evidence of bullish activity in the indicated zone.
  • The downward trend has been maintained since mid-July – the rate dropped by 5.5%. As they say, an upward correction is overdue. That is, the bears could have lost their pressure and wanted to take profits.

Bearish arguments:

  • The price is below the EMA (100), which is directed downward and may resist growth attempts.
  • The state of the economy in the United States is more favorable according to the latest data, which is confirmed by the dynamics of the exchange rate. However, the balance of opinions may change today – news on the PMI index in the US is expected this afternoon at 16:45 GMT+3.