The EUR/USD pair experienced a significant drop to its lowest point since February 15, following the release of positive data regarding the US manufacturing sector. The Institute for Supply Management (ISM) reported an increase in the manufacturing business activity index to 50.3 points in March, marking the first improvement since September 2022. This surge above the 50.0-point threshold, which distinguishes expansion from contraction, has strengthened the US dollar’s position in the market.
The positive development in the manufacturing sector, which accounts for approximately 10.4% of the US economy, has ended the sector’s longest downturn in 16 months. While new orders have increased, manufacturing employment figures remain subdued. Furthermore, the rise in raw material prices has impacted the overall index, potentially limiting a higher reading. The US Core Personal Consumption Expenditure (PCE) rose by 0.3% in February, slightly below the expected 0.4% increase. This suggests that the Federal Reserve may have room to adjust interest rates downwards in June 2024, given the muted inflationary pressures.
Market expectations for the Federal Reserve’s decision in June have slightly shifted, with a 66% chance of policy easing according to CME FedWatch Tool data. Technical analysis of the EUR/USD pair indicates a consolidation phase around the 1.0794 level, with a potential downward breakout towards 1.0650. The MACD indicator suggests a continued downward trend, with the signal line below zero. On the H1 chart, a corrective structure has been completed at the 1.0804 level, leading to a downward trajectory towards 1.0720. The Stochastic oscillator anticipates a further decline to the 20 mark, supporting the bearish outlook for the pair.
The recent positive data regarding the US manufacturing sector has had a notable impact on the EUR/USD pair, leading to a decline in the pair’s value. The strengthening of the US dollar in response to the improved manufacturing activity, along with other economic indicators, has influenced market expectations and technical analysis of the currency pair. As investors and traders assess the implications of these developments, the future direction of the EUR/USD pair remains uncertain, with potential further downside movements in the near term.