Market Analysis

EUR/USD is under selling pressure during Friday’s European session amid several challenges. The major currency pair has dropped to a six-week low near 1.0670 as the Euro weakened following disappointing preliminary PMI data from the Eurozone, indicating a slowdown in the economy.

According to the HCOB PMP report from S&P Global, the Composite PMI unexpectedly fell to 50.8 in June from the previous reading of 52.2. Although still above the 50.0 mark that separates growth from contraction, this decline missed expectations of an increase to 52.5. The Manufacturing PMI slipped further into contraction territory, while the Services PMI showed slower expansion compared to the previous month.

The report highlighted that new orders declined for the first time in four months, leading to softer growth in business activity and employment. Business confidence also dropped to its lowest level since February.

In addition to economic concerns, political uncertainty in France, the Eurozone's second-largest economy, is weighing on the Euro. Investors are cautious about potential financial implications if Marine Le Pen's National Rally (RN) forms a new government after legislative elections. The RN has proposed policies such as lowering the retirement age, reducing energy prices, increasing public spending, and adopting protectionist economic measures.

On the monetary policy front, investors are closely monitoring the European Central Bank (ECB)'s interest rate decisions. ECB Governing Council member Klaas Knot indicated comfort with market expectations of one or two additional rate cuts this year. The ECB recently cut rates for the first time in seven years at its June meeting.

From a technical standpoint, EUR/USD has corrected below the key support level of 1.0700 and is approaching the upper boundary of a Symmetrical Triangle pattern on the daily chart. The pair's long-term outlook has turned uncertain as it trades below the 200-day Exponential Moving Average (EMA) at around 1.0800. The 14-period Relative Strength Index (RSI) has dipped below 40.00 for the first time in nearly two months, signaling downward momentum.

Paraphrasing text from "FX Street" all rights reserved by the original author.