Uncover promising setups in the world of Euros: EUR/USD, EUR/GBP, and EUR/JPY

25 July 2023, Tuesday
Uncover promising setups in the world of Euros EURUSD, EURGBP, and EURJPY

European Manufacturing Sector Faces Challenges


Germany’s Manufacturing Sector Declines


Germany, known as the industrial hub of Europe, is facing a decline in its manufacturing sector. The latest data shows that Germany’s manufacturing PMI has dropped from 40.6 to 38.8. This is not good news for the rest of Europe, as Germany is leading the way in this downward trend.


Comparison of Manufacturing PMI


If we compare the manufacturing PMI of Germany, the EU, the US, and China over time, we can see that Germany (represented by the green line) is leading the pack in the decline. This is a cause for concern, and the European Central Bank (ECB) is hoping to see improvements in future core inflation prints to ease the economic stress. However, despite the challenges in the manufacturing sector, the services sector in Europe is still expanding.


Euro Declines Ahead of ECB Rate Decision


As we approach the ECB interest rate decision, the euro has experienced a decline against several G7 currencies, including the US dollar. The EUR/USD pair has fallen below the 61.8% Fibonacci retracement level and continues to move lower. This decline is likely due to yesterday’s disappointing data and the anticipation of the ECB rate announcement on Thursday. The MACD indicator suggests further downside momentum, with the next level of support at 1.1012.


Uncertainty for EUR/GBP


EUR/GBP bulls attempted to test the resistance zone at 0.8720 but were unsuccessful. The pair has seen a significant decline, even though the pound sterling has also been selling off. The euro’s decline after encouraging core inflation data suggests that the issue of inflation remains a concern in Europe. It is unlikely that the Governing Council will ease its hawkish language on interest rates, but a hawkish statement and press conference could halt the decline in EUR/GBP. Resistance levels are at 0.8635 and 0.8650.


EUR/JPY Faces Potential Reversal


EUR/JPY could be an influential pair this week as both the Bank of Japan (BoJ) and ECB hold meetings. The ECB is expected to address inflation concerns, while the BoJ is likely to maintain its current policies. However, the economic landscape in Japan is changing, with wage growth picking up and inflation remaining above 2%. This could lead to yen appreciation and a weaker EUR/JPY. Support can be found at channel support, and a bearish pullback and possible reversal may occur if the swing low at 153.45 is breached. Resistance is at the yearly high at 158.