Euro Declines on Weak PMI Ahead of Jobs Report, RSI is Oversold
The EURUSD continues to trade on the defensive ahead of the U.S. Jobs report. While the ECB’s refrained from taking a more dovish posture somewhat disappointed market expectations to some degree, there should not be a change in market sentiment as the widening growth divergence between the Eurozone and U.S. economies, continues to drive central bank activity. The central bank is concentrating on easing measures already announced last month, and which have yet to impact. A revision lower to the final Eurozone services PMI data added to selling impetus Friday.
Eurozone August retail sales rose 1.2% month over month, after falling -0.4% month over month in July. The three months trend rate rose to 0.6% from 0.3% in the three months to July and the annual rate jumped to 1.9% year over year from 0.5% year over year.
The Eurozone services PMI was revised down to 52.4 from 52.8 reported initially and versus 53.1 in August. The composite reading was revised down to 52.0 from 52.3 and versus 52.3 in the previous month.
The reading still point to expansion in overall economic activity, but the marked slowdown in recent months, coupled with other weak indicators will add to concerns about the outlook for the overall Eurozone economy.
The weekly chart of the EURUSD shows that the currency pair has broken through horizontal trend ine support at 1.2650 and is poised to test the 2012 lows at 1.2040. The RSI (relative strength index) is severely oversold, printing a reading of 17, which is well below the oversold trigger level of 30 and could foreshadow a correction. Momentum as reflected by the MACD (moving average convergence divergence) index is negative printing a reading that is at its lowest level in the past 6-months with a negative sloping trajectory.
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