21.08.202014:31 Forex Analysis & Reviews: EURUSD: Gloomy ending of Summer 2020 for the European economy. Statistics push down the euro continuously

The pressure on the euro rose sharply after the publication of the first preliminary data on activity in the eurozone countries, which surprised many economists and traders, as no one expected such a large and sharp decline in indicators. On the contrary, the indicators were predicted to grow further.

The decline in the preliminary composite purchasing managers' index for the euro zone suggests that the V-shaped economic recovery that began after the abolition of quarantine measures is slowing down. This suggests that the mechanical rebound, which must have happened, has occurred and has come to its end. Now, everything depends on the real form of companies and enterprises. The current decline in indicators is starting to bring the picture closer to a more real one. It is already clear that the economy will remain below pre-crisis levels for at least 1-2 years, and a new resumption of growth in the number of infections with the virus creates an obvious risk of a halt in the recovery, and even worse, will lead to its reversal. Many companies and enterprises are surprised by the future uncertainty that is felt across all sectors, since any deterioration in the situation with the coronavirus and the lack of support from the authorities will lead to a rapid collapse of the barely cured manufacturing sector. This is especially true of the automotive industry. Most likely, GDP data will show strong growth in the 3rd quarter, but expecting a V-shaped recovery is unlikely to be correct.

Now, let's look at the numbers. In France, the preliminary manufacturing PMI for August this year has fallen below 50, indicating a contraction in activity after a recent rebound to growth in early summer this year. The index was predicted at 53.1. Back in July, the indicator was 52.4 points. As for the service sector, then the preliminary index of purchasing managers in August fell to 51.9 points, against 57.3 points in July with a forecast of 56.0 points.

In Germany, things are a little better, but only in the manufacturing sector due to the deferred demand for cars. According to the report, the preliminary PMI for the manufacturing sector in Germany rose to 53.0 points in August, against 51.0 points in July, while the forecast was at 52.5 points. But the service sector has just sharply declined. There, the preliminary index of supply managers in August barely remained above 50 points and amounted to 50.8 points, while in July it was at the level of 55.6 points. Economists had forecast a reading of 55.4 points.

As for the data for the euro area as a whole, there is a drawdown in all directions, which led to such a sharp drop in the European currency against a number of other world currencies. According to the Markit report, the preliminary index of purchasing managers for the manufacturing sector of the euro zone in August fell to 51.7 points, while the forecast of growth to 53.0 points. Services PMI, in turn, fell to 50.1 points in August from 54.7 points in July. As a result, the preliminary composite PMI of the eurozone PMI in August fell to 51.6 points.

From the point of view of technical analysis of EUR/USD pair, if the bears could not cope with the support at 1.1830 yesterday, then today, this range was broken at the very first test, which led to a large sale of the trading instrument in the area of the minimum at 1.1780. A breakout of this area after the US PMI reports will open a direct path for risky assets to the lows of 1.1740 and 1.1710. It will be possible to speak about the stabilization of the situation and equalization of the balance of forces only after the trading instrument returns to the resistance area of 1.1830.