US economic strength eclipses Eurozone as euro drifts towards 1.1200

• EUR/USD extends its decline to a third day near 1.1200 as the US Dollar rebounds.
• October brought slower Eurozone business activity as France entered contraction and Germany’s growth lost pace.
• The Greenback gains support from firmer US business activity and expectations of a further Fed rate rise.

Disappointing Eurozone business activity figures keep the Euro (EUR) under pressure on Friday, with EUR/USD extending its losses for a third consecutive day. At the time of writing, the pair trades near 1.1200, a decline of 0.12% on the day. By contrast, renewed demand supports the US Dollar (USD), underpinned by US economic resilience and expectations for monetary policy at the Federal Reserve (Fed).

October’s preliminary HCOB Composite Purchasing Managers Index (PMI), released on Friday, dropped to 51.9 from September’s 53.1. The reading points to a slower expansion in Eurozone private-sector activity.

An unexpected contraction in France’s private sector, together with weaker growth in Germany, the Eurozone’s largest economy, accounts for the deterioration. Concerns over Europe’s economic outlook have been reinforced by the figures. France’s fiscal difficulties and persistent political uncertainty also remain a drag on the single currency.

Friday’s US economic releases, by comparison, confirm that private-sector activity in the United States (US) remains resilient. Preliminary figures from S&P Global put October’s Manufacturing PMI at 56, up from 55.9 in September. That exceeded the market forecast of 55.6 and marked a 53-month high.

After a September reading of 58.8, the Services PMI came in at 57.9, matching forecasts. The Composite PMI, meanwhile, slipped from the previous month’s 58.4 to 57.6, still comfortably above the 50 mark that separates expansion from contraction.

The US Dollar’s relative attraction is strengthened by this gap between US and European economic performance, adding to downward pressure on EUR/USD.

Fed policy expectations offer the Greenback a further source of support. Markets assign an approximately 80% probability to another interest rate rise in December as Oil prices pose inflationary risks. This pricing persists despite recent remarks by several central bank officials indicating that there is no urgency to increase rates.

With the interest rate decision due on Wednesday, next week’s Fed monetary policy meeting is now the focus for investors. No updated economic projections will be available, leaving markets to scrutinise the policy statement and Fed Chair Kevin Warsh’s remarks at the press conference that follows.

EUR/USD technical analysis points to a bearish near-term bias

A bearish near-term bias persists on the one-hour EUR/USD chart, where the pair trades at 1.1203, below the 200-period simple moving average (SMA) at 1.1214 and the 100-period SMA at 1.1222. Just above the intraday low of 1.1190, the pair shows limited momentum, with the Relative Strength Index (14) near 46. This favours further modest downward pressure unless the price regains those moving averages.

The first support to watch is 1.1190; should selling gather pace, 1.1150 and 1.1114 lie below. A move higher would initially encounter the 200-period SMA at 1.1214, then the 100-period SMA at 1.1222. Further resistance at 1.1260 and 1.1285 is likely to constrain recovery attempts for as long as the pair remains beneath those levels.

(The technical analysis of this story was written with the help of an AI tool. Know more.)