For the 24 hours to 23:00 GMT, the EUR declined 0.08% against the USD and closed at 1.3186, following dismal Ifo data from Germany, which dampened the optimism over the health of the Eurozone’s largest economy. The German Ifo business climate index fell to a 13-month low of 106.3 in August, below the market forecast for a reading of 107.0, and compared to a reading of 108.0 in the prior month. Additionally, the German business expectations index dropped to 101.7 in August, from a reading of 103.4 in July, missing market expectations for 102.1. Similarly, the nation’s current assessment index declined to 111.1 in August, compared to market estimations for a reading of 112.0. Separately, the Ifo indicated that given the current scenario, the institute may slash its economic growth forecast for Germany in 2014 to 1.5% from the current estimate of 2.0%. Elsewhere, the producer prices in Spain registered a rise on a monthly basis in July.
Over the weekend at the Jackson Hole Summit, the ECB Chief, Mario Draghi, revealed that the policymakers are willing to introduce additional stimulus, if there is further drop in inflation in the region. Separately, the Fed Chairwoman, Janet Yellen, in her speech, stated that the US economy is showing signs of improvement but cautioned about the extent of a remaining slack in the US labour market and the timing of rate hikes in relation to that slack. Meanwhile, the IMF Chief, Christine Lagarde, stated that Germany should play an important role in boosting the economic recovery in the Europe and that wages need to pick up in the nation.
In the US, the pace of growth in the services sector lost momentum as the services PMI fell for a second consecutive month in August to a level of 58.5, below the reading of 60.8 registered in July, although the reading was above the consensus expectations of 58.0. Similarly, the composite PMI fell to 58.8 in August from 60.6 in July. Additionally, the Dallas Fed’s manufacturing index fell to a 5-month low of 7.1 in August, against market expectations for a reading of 12.8, and compared to 12.7 registered in July. Meanwhile, new home sales in the US, fell for a second straight month in July, dipping 2.4% to a seasonally adjusted annual rate of 412,000 units, compared to a decline of 7.0% in the previous month. On the other hand, the Chicago national activity index edged up in July, advancing to 0.39 from 0.21 in June, against market expectations of a drop to 0.20.
In the Asian session, at GMT0300, the pair is trading at 1.3204, with the EUR trading 0.14% higher from yesterday’s close.
The pair is expected to find support at 1.3184, and a fall through could take it to the next support level of 1.3165. The pair is expected to find its first resistance at 1.3217, and a rise through could take it to the next resistance level of 1.3231.
Going forward, the crucial durable goods orders and consumer confidence data from the US would be closely watched.
The currency pair is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.