23.09.2020: EUR and GBP stop falling. Outlook for EUR/USD and GBP/USD

It seems that the slump in the pound sterling that began on Monday has finally stopped. The publication of flash PMI data is a good reason for that. In our video review, we will find out what changed the market sentiment and we will try to predict further movement of currency pairs.
First of all, we should say that the business activity data is significantly below the forecasts. For example, the eurozone services PMI dropped to 47.6 points from 50.5 points. Economists had expected a rise to 50.9 points.
At the same time, the eurozone manufacturing PMI jumped to 53.7 points from 51.7 points. However, this indicator is less significant and has almost no influence on the composite PMI. Thus, the eurozone composite PMI slid to 50.1 points from 51.9 points. The euro should have tumbled amid such figures, but it got stuck.
The euro/dollar pair managed to break the lower limit of the range between 1.1700 and 1.1910. It was for the first time since the range appeared seven weeks ago. The lower limit of the mentioned rage is located below the level of 1.1700. This could be a sign of a change of the mid-term uptrend. However, it will be possible only if market participants continue opening short deals.
According to the chart, the pair is hovering between the levels of 1.1670 and 1.1715. The price is likely to reach a new low. Traders are also expecting a drop in the euro.
The current slowdown is a short-term phenomenon. If the price fixes below 1.1670, it may decline deeper to 1.1650 and then, to 1.1550-1.1500.
According to the alternative scenario, the euro/dollar pair may continue fluctuating within the levels of 1.1670 and 1.1760.
From the fundamental point of view, the pound sterling should have also dropped as in the UK, all three indicators of business activity declined. Thus, the services PMI decreased to 55.1 points from 58.8 points whereas in the manufacturing sector, business activity shrank to 54.3 points from 55.2 points. As a result, the UK composite PMI fell to 55.7 points from 59.1 points.
In other words, the PMI figures had no influence on the market sentiment. At the moment, all changes are caused by a mounting number of new virus cases. Investors are more preoccupied with a possible introduction of restrictive measures in some countries. Moreover, the epidemiological situation in Europe is getting worse and worse. However, today, there is no news about tightening of containment measures. That is why investors have taken the wait-and-see approach.
Investors are likely to ignore the US PMI data. Notably, economists foresee rather weak figures.
The pound/dollar pair is still falling. It has already broken the important level of 1.2770. This gave sellers an opportunity to change the mid-term tendency. Since September, the pair has lost over 800 pips hitting the levels logged in middle of July. However, analysts suppose that it is not the limit.
On the trading chart, we can see that the pair is declining to new levels. If it breaks the level of 1.2620, it may slide to 1.2500—1.2350. Besides, the price may show a rebound amid changes in the market sentiment and news flow.


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