The EURUSD is rallying in the short term on the temporary weakening of the dollar, similarly to the GBPUSD. However, the prevailing market sentiment remains ostensibly bearish-oriented. Read more about it from our last comprehensive analysis of the currency pair.
Germany's manufacturing PMI decreased to 62.7 index points in August, below market forecasts. Factory activity in the biggest economy in the Eurozone tumbled to its lowers level in six months despite record-breaking orders in the previous month.
These diverging results attest to an uneven pace of economic recovery in the Euro Area, which is underscored by the shaken investor confidence in Germany over the same period.
As can be seen on the hourly chart above, the recent pullback on the price action of the EURUSD emerged following a breakout from the Descending Wedge pattern. Afterwards, the price action was able to subsequently break out above the 23.6 per cent Fibonacci retracement level at 1.16954 and the 38.2 per cent Fibonacci at 1.17163.
This happened following a rebound from the 100-day MA (in blue). At present, the price action is probing the 200-day MA (in orange), which serves the role of a major floating resistance.
In case that it manages to penetrate above it as well, the pullback would then likely be extended higher towards the 61.8 per cent Fibonacci at 1.17501, which was recently crossed by the 300-day MA (in purple).
Traders should keep in mind that the MACD indicator is currently signalling peaking bullish momentum, which could be an early indication of an imminent reversal. This is inlined with the broader bearish sentiment in the market.
Markit's latest manufacturing survey recorded a 3.2 index points contraction since July when the index was recorded at 65.9 points. The drop exceeded the projections of the initial market forecasts, which were anticipating a decrease to 65.1 index points.