Euro Stuck Between Growth Signs and Dollar Strength

Key Takeaways:

*Euro slipped as dollar strength overshadowed stronger Eurozone data.

*PMI rose to 51.1, the highest in 15 months, with manufacturing returning to growth.

*U.S.-EU trade deal and tariffs capped upside, keeping investors cautious ahead of Jackson Hole.

Market Summary:

The Euro remained under pressure, slipping toward the $1.16 handle as dollar strength and trade uncertainty overshadowed stronger-than-expected regional data. The latest HCOB Composite PMI rose to 51.1, its highest in 15 months, with the manufacturing sector posting its first expansion since 2022. The improvement highlights surprising resilience in the Eurozone economy, with Germany leading the rebound and offering the ECB room to delay additional easing measures.

However, optimism is capped by external headwinds. The newly implemented U.S.-EU trade deal locks in 15% tariffs on most goods and has already weighed on foreign orders for Eurozone exporters, particularly in Germany. At the same time, the dollar continues to draw support from hawkish Fed pricing and safe-haven demand, creating a ceiling for Euro gains.

Looking ahead, traders are focused on the Jackson Hole symposium, where Fed Chair Powell’s tone could dictate near-term direction. A dovish shift may allow the Euro to capitalize on its recent data surprise, while hawkish guidance risks keeping the currency pinned below resistance levels around 1.1725.

Technical Analysis

EURUSD, H4: 

The EUR/USD chart shows the pair under pressure, currently hovering around the 1.1615 – 1.1585 support zone after a steady decline from the 1.1725 resistance area. Price is trading below the 50- and 100-period SMAs, signaling a bearish bias in the near term.

Momentum indicators support the weakness. The RSI is at 38, leaning toward bearish territory but not yet oversold, suggesting there’s still room for further downside. The MACD histogram is flat but in negative territory, with both the MACD and signal lines trending below zero, indicating sustained bearish momentum.

If the 1.1585 support level breaks, EUR/USD could extend its decline toward 1.1403, with a further drop exposing the key support at 1.1245. On the flip side, a rebound above 1.1645 – 1.1663 resistance level could ease bearish pressure and allow a retest of 1.1725 resistance, where sellers are likely to re-emerge.

Resistance level: 1.1725, 1.1880

Support level: 1.1585, 1.1403