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  • Annual Consumer Price Index (CPI) in the eurozone dropped to 0.9% in September.
  • Disappointing Purchasing Managers’ Index (PMI) data weighed on the USD on Tuesday.
  • US Dollar Index continues to float above despite the sharp drop.

The EUR/USD pair registered its lowest daily close since May of 2017 at 1.0899 on Monday and edged lower on Tuesday during the European trading hours as the shared currency struggled to find demand following the uninspiring inflation data from the euro area. However, the Greenback came under strong selling pressure in the second half of the day and allowed the pair to recover Monday’s losses. As of writing, the pair was up 0.35% on the day at 1.0934.

In its preliminary estimate on Tuesday, the Eurostat reported that inflation in the eurozone, as measured by the Consumer Price Index (CPI), ticked down to 0.9% on a yearly basis in September and weighed on the shared currency. Meanwhile, the IHS Markit’s Manufacturing Purchasing Managers’ Index (PMI) came in at 41.7 in Germany to beat the market expectation of 41.4 but did little to nothing to help the EUR find demand.

PMI data reminded investors of a possible recession in the US

In the early trading hours of the American session, the Institue for Supply Management’s (ISM) monthly report showed that the economic activity in the manufacturing sector contracted at strong pace in September in the United States with the headline PMI reading dropping to 47.8 from 49.1 in August and missing the market expectation of 50.1.

The Greenback lost its traction on the dismal data and the US Dollar Index, which tracks the USD’s value against a basket of six major currencies, quickly pulled away from the multi-year high that it touched at 99.67 earlier in the day and is now looking to end the day in the negative territory around 99.15.

There won’t be any macroeconomic data releases from the euro area on Wednesday and the Automatic Data Processing (ADP) will release the private sector employment data for the US later in the day.

Technical levels to watch for