Double-top bearish reversal seems to be forming – OCBC

The Euro (EUR) fell after French services PMI and German manufacturing PMI slumped into contractionary territory. EUR was last at 1.1143, OCBC FX strategists Frances Cheung and Christopher Wong note.

Mild bullish momentum on daily chart

“Slump in PMIs maybe a concern but it remains to be seen if this is a one-off summer lull or whether it represents a more material economic downturn. Further growth/activity data would be key as confirmation of deeper economic slowdown will suggest that ECB easing may need to play catch up and that would warrant a softer EUR (which markets may contemplate playing this theme pre-emptively).”

“Mild bullish momentum on daily chart shows tentative signs of waning while RSI turned lower. Technically, double-top bearish reversal appears to be forming. Risks skewed to the downside. Support at 1.1090 (21 DMA), 1.1060 (23.6% fibo retracement of 2024 low to high) and 1.10 (50 DMA).”

“Resistance at 1.1160, 1.12 (2024 high). Looking at EUR-crosses, we favour tactical short EURGBP on growth and monetary policy divergence between EU/ECB and UK/BOE.”