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$1.1806 for EUR/USD after bad data releases come out

Chris Lee

The single European currency looked set to end the week on a bad note this week after it wiped out some of its recent surges.

The euro has been one of the main beneficiaries of a slip in the value of the greenback in recent weeks.

However, a domestic data release from the bloc showed that there are still significant worries about the Eurozone’s capacity to recover from the coronavirus pandemic.

According to a flash manufacturing and services purchasing managers’ index, which was calculated on a composite basis, there was a month-on-month drop into August.

This month’s figure from IHS Markit of 51.6 was down from last month’s of 54.9 – suggesting that industries are not yet back on their feet after the pandemic.

For the euro, this spelled trouble.

A dip of half a percentage point was recorded in its pair with the greenback.

The pair was spotted at $1.1806 at one point.

However, traders at OctaFX and others noticed that the euro’s gains did not necessarily spell a full recovery for the greenback, despite the fact that the pair is widely considered to be locked in a battle for the markets’ top spot.

The currency is still set to end the week on a pessimistic note.

It is now widely expected to end the week on another loss.

If this happens, it will mean that it has closed out nine weeks in a row lower than the week before.

The fundamentals do not look good for the US economy, either.

Economic data releases earlier in the week showed that the number of people claiming unemployment benefits in the country in recent weeks had gone up by a higher amount than had been expected.

There are also concerns over the political situation in the US.

There is still no cross-party agreement between Democrats and Republicans on how to go about an extended economic recovery package, suggesting that Americans who are out of work due to the coronavirus pandemic could continue to be so for a long time.

The dip in the value of the euro contributed to some short-term cheering news for the dollar index, however, which by Friday morning was up by 0.3% at one stage.

It was seen at 93.005 at this point.

Perhaps the best performance over the course of the day was the offshore Chinese yuan, which was seen at 6.8935 at one stage in its pair against the greenback.

This version of the yuan is the one traded on the global markets and its rates are therefore set by global forces – as opposed to the onshore yuan, which is managed by the Chinese authorities.

Also in Asia, the Japanese yen was spotted up in its pair against the dollar.

The yen managed to surge to well over the 105 level at one stage.

Whether or not this meant a shift away from risk, as such moves for the yen often used to, remained unclear.

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Chris Lee
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