EUR / USD pair
The economic situation in the euro area continues to deteriorate. Yesterday's data on Services PMI business activity in the service sector decreased from 53.6 to 53.3 in July. Manufacturing PMI causes even more alarm as its figure dropped to the lowest value since January 2013 to 46.4 points. In the US, Manufacturing PMI also declined but still remains in the growth zone of 50.0. American Services PMI increased from 51.5 to 52.2. Also, Sales of new homes in the United States rose from 604 thousand (revised down from 626 thousand) to 646 thousand last month.
In such a situation, the question of today's ECB monetary policy decision sharpens even more. The market probability of reducing the rate is 54% but with not so high expectations that the ECB could not neglect it. We are not waiting for the rate cut at today's meeting but instead we are waiting for a "promise" to lower the rate in September and announce other mitigation measures. The reason is simple. In fact, there is a crisis but its acute phase may not come this year. Then, the ECB will not have any tools to overcome it. Moreover, lowering the rate now will further aggravate the situation in the European banking system.
Yesterday, the price reached the target level of 1.1116 by about 10 points, which changes the value of this level from target to signal. Overcoming its price opens the target of 1.1074 with Fibonacci level of 123.6%. Next, we are waiting for the euro at the Fibonacci level of 138.2% at a price of 1.0985.
On the four-hour chart, as we expected yesterday. Consolidation has formed under the level of 1.1155 into an additional few candles. Today, we are waiting for the indicator to turn downward and the euro will continue to fall.
