Services PMI Revised Lower

The latest round of eurozone data today has painted further dark clouds on the horizon for the currency bloc. The final Services PMI reading for the eurozone last month was revised lower to 52 from 52.4 with Spanish and Italian services readings dropping lower. French and German readings remained in line with consensus though only the German reading was in positive territory.

Eurozone Economic Fears

Eurozone PMIs have been trending lower in recent months, raising sharp concerns over the economic outlook there given the ECB’s reaffirmed commitment to further rate hikes. With inflation still elevated and ECB rates raising further, traders fear a forthcoming economic storm in the eurozone. We’ve heard key players this week warning over the risks of ‘policy error’ from the ECB and the potential that it tightens to far and slams the economy. Traders will now be looking to tomorrow’s retail sales reading for an insight into how consumers behaved last month.

PPI Fell Again

There was some good news today, however. Eurozone PPI was seen dropping 1.9% last month, more than the 1.7% decline forecast. Lagarde has warned over the role that corporates are playing in keeping inflation entrenched at higher levels and so signs of prices falling for producers will certainly be welcomed though the key thing is to see those declines being passed on to consumers.

Technical Views

EURUSD

For now, the pair continues to hold below the broken bull channel lows, but above the 1.0785 level support. This sideways range is expected to continue near-term until we see some more decisive movement in USD which might come in reaction to tonight’s FOMC minutes or on Friday around the NFP. To the downside, 1.0515 is the next support while 1.1126 is the next topside level to note.