Yesterday, advance PMI data was announced in the UK, US and Eurozone. The PMIs are crashed to just above 47 for all economic zones. Lower PMI signaling that the global economy might be heading for a recession. While the PMIs getting worse, some FED members started to voice some concerns about a possible overtightening. It is possible that members starting a change their forward guidance as the FED hike cycle nears its end in half a year, at possibly %4.5 – %5 zone.
Lower PMIs cause FED’s rate peak expectations to get a little lower which fuels EURUSD ahead of the ECB meeting and the first US 3rd quarter GDP data. The one-year-long downtrend is being tested again.
The downtrend might get broken this week with a disappointing GDP from the US and a hawker ECB. A break to the upside will lead to more volatility in the short-term and a possible long-term buying opportunity. 1 and 1.034 are the main resistances to follow after a break. In the medium term, a flatter pattern might be formed before a clear run to the north.
Despite many fundamental indicators changing, it is safer to follow the downtrend until a clear break happens. Even after that, a possible bull trap might appear. Cautious risk management with a long-term target might be safer when a long-term trend, like this one, is near its breaking point.