Euro and stocks hold losses ahead of PMI data
EUR/USD => The euro falls below 1.00
Tesla => The stock trades down for 5 straight days
Nasdaq => The index trades below 12500
EUR/USD drops to 2-decade low
EUR/USD dropped 0.95% yesterday, taking the price below parity to its lowest level in 2 decades.
The euro is facing several headwinds including a deepening energy crisis, surging inflation and slowing growth as a result of the fallout from the Ukraine war. The latest leg lower came after Russia said that it would cut gas supply to Europe via the Nord Stream 1 pipeline for 3 days later this month which sent natural gas prices surging. With energy prices rising further inflation is likely to keep rising making a recession almost unavoidable.
Meanwhile, the USD rallied hard on bets that the Fed will keep raising interest rates at a fast pace. Attention now shifts to the eurozone and US PMIs which is expected to show that business activity contracted again in July in both regions.
Where next for EUR/USD?
EUR/USD rebounded lower off the 20 sma falling below the 20 sma, which combined with the bearish RSI are keeping seller’s hopeful of further losses.
Sellers need to break below 0.9926 yesterday’s low to create a lower low and extend the bearish trend towards 0.99. On the flip side buyers will look for a move over 0.9970 the July low to rise towards 1.00 ahead of 1.0180 the 20 sma. A rise above here could negate the near-term downtrend.
Tesla falls on price rises, stock split this week
The EV maker closed over 2% lower on Monday after a tweet from, Elon Musk over the weekend announcing that the Self-Drive program will see a 25% price increase to $15000 in September.
The announcement comes ahead of the Tesla stock split later this week after the closing bell on 24th August. Tesla is to conduct a 3-for-1 stock split, which means investors will receive two additional shares for each share that they hold. Tesla say that they are doing the stock split to offer more attractive compensation packages to employees.
However, stock splits lower the price of each share making them more affordable to buy, improving popularity of the stock and the liquidity. Given that Tesla has lost over 25% of its value in 2022, the need for a boost in the share price is clear.
Nasdaq looks to PMI data
The Nasdaq tumbled over 2.5% in the previous session, extending last week’s selloff, as hawkish Fed bets ramped up.
Following comments from several Fed officials, the market is no longer expecting a dovish pivot from the Fed anytime soon. As bets rise that the Fed will keep raising interest rates at a fast pace, stocks came under pressure, with the Nasdaq leading the way lower. Today the futures are holding steady as the focus turns to US business activity data, as measured by the composite PMI.
Expectations are for the composite PMI to fall further into contraction in July. A weaker reading could temper hawkish Fed bets and help stocks higher.
US Composite PMI July Expected: 47.5 (0.2) Previous: 47.7
Support can be found at 12370 (50 sma) and 12000 (round number).
Resistance for the index can be seen at 13150 (20 sma) and 13540 (May high).
