EUR/USD is trading lower on Friday near the 1.1370 area, presenting difficulties despite stronger-than-expected data on business activity in the euro zone. The US Dollar Index (DXY) remains stronger near 101.50, offering narrow support for the pair.
Germany’s preliminary HCOB Composite Purchasing Managers Index (PMI) rose to 51.2 from 49.5 in July, beating expectations of 49.8 and returning to expansion territory. The manufacturing PMI improved to 52.2 from 50.3, while the services PMI increased to 49.6 from 48.6, but remained below the 50.0 threshold separating expansion from contraction.
Activity across the wider euro area also intensified. Composite PMI rose to 51.9 from 50.0, beating the forecast of 50.3. The manufacturing PMI rose to 52.0, while the services PMI rose sharply to 51.6 from 49.4, indicating that the services sector has returned to expansion.
The preliminary S&P Global Manufacturing PMI for the United States (US) fell to 53.8, beating expectations of 54.5, while the Services PMI rose to 53.6 from 51.2, well above the forecast of 51.0. A robust services reading could maintain support for U.S. Treasury yields and prevent a deeper decline in the dollar.
Risk sentiment also improved following reports that Pakistan and Iran are exploring a potential path to resuming U.S.-Iran negotiations as part of a China-backed diplomatic initiative. The eventual easing of regional tensions has contributed to a edged decline in oil prices and reduced safe-haven demand for the US dollar, although significant hurdles remain in negotiations.
Investors’ attention will now turn to the Federal Reserve (Fed) meeting scheduled for July 28-29. The Fed is expected to maintain its target range of 3.50-3.75%. The meeting will not include up-to-date economic forecasts or an updated scatter chart, so Chairman Kevin Warsh’s policy statement and press conference will remain the main drivers of EUR/USD.
Short-term technical analysis:
On the 4-hour chart, EUR/USD is trading at 1.1369 with a bearish near-term bias, holding both below the 20-period plain moving average (SMA) at 1.1397 and the 100-period SMA at 1.1422. The pair is also trading below the nearby upper limits at 1.1387 and 1.1391, strengthening the upper limit, while the Relative Strength Index (RSI) is hovering near 37, indicating continued downward pressure, but not yet oversold.
The downside is that immediate support is located just below the market at 1.1368 and 1.1366, where a breakout would open the door to an extension of the recent decline. On the other hand, a bounce above the 1.1387-1.1391 band is needed to alleviate immediate pressure, with the 20-period SMA at 1.1397 then providing another barrier ahead of the 100-period SMA at 1.1422, a break of which would be required to challenge the broader bear structure.
(The technical analysis for this story was written with the assist of an AI tool. Find out more.)
