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  • EUR/USD drops to multi-week lows below 1.17 on dollar demand. 
  • Fed’s policymaker struck an optimistic tone on Tuesday, putting a bid under the greenback. 
  • Above-forecast Eurozone PMIs are needed to stall EUR/USD’s sell-off.

EUR/USD’s downward move is gathering steam, and the bulls need better-than-expected Eurozone PMI reports to arrest the fall in the common currency. 

The currency pair is currently trading at 1.1679, the lowest level since July 27, representing a 1.34% decline on a week-to-date basis. 

Investors have offered Euros this week on renewed fears of coronavirus lockdown restrictions across the Eurozone and relatively less dovish comments by Federal Reserve’s policymakers. 

“Markets were surprised after Fed President Evans said [on Tuesday]the economy has returned to 90% of pre-pandemic levels (because it certainly doesn’t feel that way) and the Fed could raise interest rates before the 2% average inflation target is reached,” BK Asset Management’s Kathy Lien noted in her daily analysis. 

From a technical analysis standpoint, Tuesday’s close below 1.1770 confirmed a head-and-shoulders bearish reversal pattern and opened the doors for 1.1530 (target as per the measured move method). 

  • EUR/USD Price Analysis: Breaks below 1.17, head-and-shoulders breakdown confirmed

Focus on PMIs

The data due at 07:30 GMT is expected to show the German Manufacturing Purchasing Managers’ Index (PMI) rose slightly to 52.5 in September from 52.2 in August. Eurozone’s gauge is also seen rising to 51.9 from 51.7. 

“Better than expected PMI scores would suggest that the Eurozone recovery is strengthening and that in turn would help put a floor under the euro,” according to FXstreet’s Senior Analyst Joseph Trevisani. 

However, if the PMIs miss estimates, markets may begin pricing in additional European Central Bank stimulus, fueling a deeper decline in the shared currency. 

Technical levels