24.09.201900:43 Forex Analysis & Reviews: EURUSD: Horrible manufacturing activity in the eurozone is another sign of economic recession

Data on a decrease in manufacturing activity in France, Germany and the eurozone led to a sharp decline in risky assets in the morning against the US dollar. Even despite the fact that the report is still preliminary, it is obvious that the eurozone economy continues to gradually slide into recession, and the measures of the European Central Bank, announced two weeks earlier, will clearly not be enough to return to a gradual recovery.

According to the report, the preliminary index of PMI purchasing managers for the manufacturing sector in France in September this year fell to 50.3 points after rising to 51.1 points in August this year. Economists had forecast a growth of 51.2 points. The preliminary index of PMI procurement managers for the French services sector also fell in September, to 51.6 points, against 53.4 points in August, with a forecast of 53.2 points.

No matter how the German Bundesbank thinks about the fact that the recession is not a cause for concern, the data indicate the exact opposite. In today's report by Markit, it is clearly indicated that the manufacturing sector is in a deplorable state, and the deterioration of trade relations with the United States can lead to very serious consequences due to reduced exports, since one domestic market is clearly not enough. The German Bundesbank believes that the economy in the third quarter probably entered into a small technical recession, but this does not mean the inevitable cessation of the country's economic growth.

According to the data, the preliminary index of PMI for the manufacturing sector in Germany in September this year fell to 41.4 points after a slight recovery in August to the level of 43.5 points. Economists had forecast growth to 44.0 points. It is important to note the decrease in the index for the service sector. Thus, the preliminary index of PMI for the German services sector dropped to 52.5 points in September against 54.8 points in September and a forecast of 54.2 points.

The decline in company activity in Germany was the largest in almost seven years. This once again confirms the fact that the country's economy is on the verge of a recession. Uncertainty surrounding Britain's exit from the EU is also negatively affecting the industry, primarily the automotive industry.

As a result, the preliminary index of PMI for the manufacturing sector of the eurozone in September fell to 45.6 points against 47.0 points in August. Economists had forecast the index at 47.2 points. The eurozone services sector in September fell to 52.0 points against 53.5 points in August with a forecast of 53.3 points.

The composite index of purchasing managers in September again approached a critical point of 50 points and amounted to 50.4 points, while in August it was at 51.9 points.

This once again suggests that the European Central Bank will have to think about new measures and, most likely, maintain a soft approach to monetary policy in the near future. Here we are talking about lowering the key interest rate, which at the last meeting in September, the ECB has not yet resorted to, limiting itself to lowering the deposit rate and launching the asset purchase program.

As for the current technical picture of the EURUSD pair, the direction of the market remains bearish, and given the worsening prospects for the European economy, we can hardly expect risky assets to return to the buyers' market. A break of thelow of 1.0970 will increase pressure on the trading instrument, which will lead to large support located at the low of this month in the area of 1.0920.