Market Analysis: US Dollar On the Rise Despite Weak PMI Data

EUR/USD

The euro fell against the US dollar on Friday as economic data showed a contraction in economic activity, which could prompt European Central Bank hawks to soften their policy stance. Preliminary data indicates a contraction in economic activity in the eurozone's two largest economies, France and Germany. France's HCOB purchasing managers' index (PMI) for the services sector fell to a 34-month low in September, well below forecast, while Germany's PMI rose to 46.2 but below economists' forecast of 47.2. With inflation still high in the eurozone and at risk of rising, the ECB's next move could be to raise rates before rate cuts are on the agenda, several policymakers said on Thursday. The immediate resistance can be seen at 1.0663, a breakout to the upside could trigger a rise towards 1.0702. Immediate support is seen at 1.0623, a break below could take the pair towards 1.0579.

The previous ascending channel remains. Now, the price is in the middle of the channel and can continue its horizontal movement.

GBP/USD

The pound fell against the US dollar on Friday. Weak business activity and retail sales data weighed on the currency, while traders lowered their expectations for future interest rate hikes following the Bank of England's decision to keep rates steady overnight. Preliminary data for the services sector showed a decline from 49.5 in August to 47.2, signalling a continued contraction and a fall below the critical 50-point threshold that separates economic growth from contraction. Additionally, UK retail data showed consumer spending partially recovered in August after a rainy July, with monthly growth of 0.4%. However, this growth narrowly missed economists' forecasts, adding to the overall cautious sentiment around the pound. The immediate resistance can be seen at 1.2303, a breakout to the upside could see a rise towards 1.2359. On the downside, immediate support is seen at 1.2226, a break below could take the pair towards 1.2173.

The previous ascending channel remains. Now, the price is in the middle of the channel and may continue to move towards the upper border.

USD/JPY

The US dollar rose against the yen on Friday as gains were driven by recent global business activity data that highlighted the United States' stronger economic position compared with other major economies. However, S&P Global said its US composite PMI index, which tracks both the manufacturing and services sectors, fell to a reading of 50.1 in September. This marks a slight decline from the final reading in August of 50.2. The data release follows disappointing economic data from Europe, especially France, where economic activity contracted faster than expected in September. The yen fell to 148.42 against the US dollar, approaching the 150 mark. Strong resistance can be seen at 148.64. A break upward could trigger a rise to 149.64. When falling, immediate support is visible at 147.91, a break below could take the pair towards 146.76.

The previous ascending channel remains. Now, the price is in the middle of the channel and may continue to move towards the lower border.