China, US data renew EUR/USD parity risk

Aug 15 (Reuters) – EUR/USD fell to a five-session low on Monday after disappointing US and Chinese data rekindled worries about slower global growth, renewing the risk of a drop below parity as technicals also flash warnings to longs.

Dismal Chinese retail sales and industrial output data combined with a PBOC rate cut and massive downside miss in the Empire State manufacturing index heightened worries about global growth while euro zone struggles with potential energy shortages and falling Rhine river levels impacting trade.

Euro zone and global interest rates reacted bearishly. September 2023 Euribor prices rallied sharply as investors priced in a lower terminal ECB rate. The dollar’s yield advantage increased as German-US 2-year spreads widened, weighing down.

Technicals highlight downside risks. EUR/USD fell below the 10- and 21-day moving averages as well as the base of the rising wedge pattern on daily charts. Falling daily and monthly RSIs reinforce bearish signals.

Investors now await a slew of Fed speakers this week. A reiteration of hawkish risks would buoy the dollar.

Should risk aversion persist, EUR/USD could weaken, putting July’s low in focus.

(Christopher Romano is a Reuters market analyst. The views expressed are his own)