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EUR/GBP Cements Bearish Break on Poor PMIs

  • The EUR slipped alongside poor PMI data from France and Germany, with the services sector falling short of forecast and showing more broad-based economic weakness. The subsequent break lower in EUR/GBP put the cross to the lowest levels since last August, with prices piercing the key support at 0.8504 (the YTD low). A close at or below these levels would mark a bearish break and cement the downtrend posted off the mid-August high (with the 100-dma proving the key resistance in the cross). 0.8479 marks the next downside level, the 1.0% 10-dma envelope ahead of 0.8471, the Aug 29 '22 low.
  • EUR/JPY extending corrective pullback on the PMIs, putting the cross through last week's lows of 157.66 as well as the 23.6% retracement for the Jul - Aug upleg. Next key level on the way lower: the 156.66 50-dma that's helped define the uptrend off the March lows. JPY the main beneficiary of the soft data this morning, but the USD also gaining and helping keep GBP/USD under pressure and at the lowest levels of the week so far.
  • Meanwhile, UK PMI numbers showed weak demand via sluggish new orders as well as a further moderation in inflationary pressures, evident in the slowest pace of rise in input costs for two-and-a-half years.
  • Prelim US PMI data takes focus ahead, with markets expecting manufacturing to hold below 50.0, while services holds just in expansion territory. New home sales data is set to follow alongside Eurozone consumer confidence. The speaker slate remains light, keeping focus on the beginning of the Jackson Hole policy symposium later in the week. Markets received confirmation earlier today that BoJ's Ueda would be in attendance.

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