The EUR/USD currency pair fell to its lowest level since February 15 after positive US manufacturing sector data was released on Monday, indicating a strengthening US dollar.

The Institute for Supply Management (ISM) revealed that the US manufacturing business activity index increased to 50.3 points in March, up from 47.8 points the previous month. This movement above the 50-point mark, which separates growth from contraction, marks a significant improvement for the manufacturing sector.

The report noted a rise in new orders but a lack of growth in manufacturing employment. Additionally, higher raw material costs partly capped the index’s gains. This positive shift signals the end of a 16-month contraction period for the manufacturing sector, which accounts for about 10.4% of the US economy.

Other economic indicators showed that the US Core Personal Consumption Expenditures (PCE) Price Index, a key measure of inflation watched by the Federal Reserve, increased by 0.3% in February, slightly below the expected 0.4%. This data suggests that inflationary pressures remain moderate, potentially giving the Fed more leeway to lower interest rates in June 2024.

Market anticipation for the Fed’s June meeting has slightly adjusted, with the CME FedWatch Tool now indicating a 66% probability of an interest rate cut, a minor dip from 68% previously but up from 57% the week before.

Technical Analysis of EUR/USD

On the 4-hour chart, EUR/USD is consolidating around 1.0794. A break below this level could lead to further declines towards 1.0650, potentially followed by a minor correction back to 1.0794 and then a further drop to 1.0600. This bearish scenario is supported by the MACD indicator, which remains below zero, signaling a continued downtrend.

The 1-hour chart shows the completion of a corrective pattern at 1.0804. Following the news, the market moved below 1.0777, suggesting a continuation of the downtrend towards 1.0720. A rebound to 1.0790 may occur before the pair resumes its fall to 1.0650. The Stochastic oscillator, currently under 50, further supports a bearish outlook, indicating a potential move towards 20.