That’s resulting in a quick drop in the euro, with EUR/USD falling from around 1.0920 levels earlier to a low of 1.0885. Of note, sellers are also looking to take out the 200-hour moving average on the day – which will see the near-term bias switch to being more bearish instead:
EUR/USD hourly chart
With the ECB looking to push their case to tighten further and perhaps even extend that narrative into September, a sudden decline in economic activity is not a welcome sign. That will prompt fresh worries on growth prospects and with credit conditions also set to tighten further in the months ahead, the outlook is not all too promising.
This also is likely to rebuff dollar strength and the risk aversion we have been seeing on the week. Bond yields have slumped on the data and equities are not going to find much comfort before the weekend surely.
Going back to the euro, a break of the 200-hour moving average (blue line) above will be a good signal for sellers to try and restart the downside momentum in the pair. The next key target will be the 100-day moving average at 1.0808. If the German PMI disappoints as well, that is certainly a plausible target.