EUR/USD: The Euro is increasing its fall in the face of european PMI data largely disappointing

While the pair already had a bad fall yesterday, the european PMI data disappointing released this morning are stepping up pressure on the pair EUR/USD, with for now a hollow on at 1.1126, the lowest since may 31.

Index PMI manufacturing of France was 50 points versus 51.6 expected, while the PMI services is displayed to 52.2 against 52.7 expected by economists.

The PMI manufacturing of Germany has without doubt been the most disappointing, at 43.1 points against 45.1 earlier. Only the PMI in services has shown very slightly higher than expected at 55.4 points versus 55.3 expected.

Finally, for the euro area as a whole, the manufacturing PMI was shown to 46.4 points from 47.7 in advance, for a service PMI to 53.3 points as expected.

These figures thus confirm the difficult position in which is currently the european economy, and should enhance the expectations are dovish for the ECB meeting tomorrow.

Yesterday evening, the probability perceived by the market to see the ECB reduce its rates from tomorrow was just above 40%, and it increased more in the face of unpleasant surprises in the economic indicators released this morning.

However, the baseline scenario remains that the ECB is happy to modify its forward guidance to prepare the market for a rate cut at the next meeting in the month of September.

This means that after you have “sold the rumor”, the market could “buy new” and put the Euro if Draghi does not exceed the market expectations.

And given the high expectations of the market, it seems that only a rate cut tomorrow could surprise enough to bring down the Euro significantly.

To summarize, the more the Euro falls before the ECB meeting, the more the risk of the Euro bounce back tomorrow will increase, even if the ECB proves to be as expected dovish.

From a graphical point of view, the break under the support of 1.1150 this morning paves the way for a test of the lows annual 1.1106.

The increase, 1.1150 will be the first resistance to take into account, but only a return back above 1.12 would begin to alleviate the bearish pressure.

Finally, it should be noted that after the european PMI data this morning, traders will still need to monitor the PMI of the United States at 15: 45, and new home sales US 16.