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US Dollar Outlook: EUR/USD Price Spikes Lower on PMI Data

US Dollar Outlook: EUR/USD Price Spikes Lower on PMI Data

2020-08-21 14:15:00
Rich Dvorak, Analyst
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USD PRICE OUTLOOK: US DOLLAR ATTEMPTS TO BOTTOM AS MARKIT PMI DATA CRIMPS RISK APPETITE

  • EUR/USD price action is coming under pressure following the latest Markit PMI data
  • The DXY Index is gaining ground to trade back above the 93.00-price level
  • US Dollar shows signs of bottoming in large thanks to fading appetite for risk

The US Dollar has ascended sharply so far today and now presses fresh intraday highs measured by the DXY Index. It looks like USD price action is strengthening broadly in response to preliminary PMI data for August 2020 just released by IHS Markit. US PMI data not only improved sequentially, but the leading economic indicators topped market estimates for both services and manufacturing components. Actual figures are detailed on the DailyFX Economic Calendar.

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AUGUST 2020 IHS MARKIT PMI – UNITED STATES & EUROZONE COMPOSITE DATA

Markit PMI Chart of Historical Data August 2020

Largely driven by evidence of diverging economic growth trajectories between the Eurozone and United States, spot EUR/USD has pushed considerably higher over recent weeks. This has helped steer the broader US Dollar to its weakest level in two years seeing that Euro performance makes up more than half of the DXY Index composition.

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That said, the bullish EUR/USD price trend has started to waver and is now showing signs of coming under pressure as the US Dollar attempts to base. US PMI data besting economic activity across the Eurozone could serve as one fundamental driver with enough credence to provide the DXY Index with a meaningful boost and help the US Dollar recoup recent downside.

EUR/USD PRICE CHART & US DOLLAR INDEX OVERLAID: DAILY TIME FRAME (27 APR TO 21 AUG 2020)

US Dollar Index Price Chart EURUSD Outlook

Chart created by @RichDvorakFX with TradingView

US Dollar rebound potential is also in consideration of a reversal from the July PMI narrative. FX traders may look to press key pivot points going forward with a focus on current month-to-date highs and month-to-date lows for the DXY Index as EUR/USD builds a range.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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