Global macro overview for 23/08/2016:
The set of flash PMI Services and Manufacturing data from the eurozone was released this morning and it was a mixed bag of data. In Germany, the main powerhorse of the eurozone, the PMI Services data was worse than expected (53.5 vs. 54.4 and 54.4 previously), together with PMI Manufacturing data (53.6 vs. 53.7 and 53.8 previously) and overall PMI Composite (54.4 vs. 55.1 and 55.2 previously). Since the March 2016, the German PMI Composite index had been steadily rising, but the recent reading is signaling a weaker pace of expansion. According to the Markit report, the main reason for the drop was attributed to the service sector, where activity rose to the smallest degree in 15 months. In conclusion, the overall scores of flash PMI data for the whole Eurozone were slightly better than expected (but nothing extraordinary anyway), there is still a chance, that lower than expected figures form Germany is the seasonal correction towards the average during the summer months and not the beginning of something worse.
Let's now take a look at the EUR/USD technical picture in the 4H time frame after the data was published. The 100% Fibo extension of the previous leg up was violated, but the market did not make another higher high and instead of that is still trading below the intraday resistance at the level of 1.1363. The growing bearish divergence suggests more downward strength and any violation of the level of 1.1266 will be the first confirmation of increasing bearish pressure.
