France PMI Miss Deepens Eurozone Recession Fears

EUR/USD: Support Levels Under Pressure

Technical support at 1.0800 is now in play. A break below that level would open the door to the 1.0750 area, a zone that held in late April. The 50-day moving average sits near 1.0830 and has already been breached intraday. Positioning data from the latest CFTC report shows speculative longs in the euro are still elevated relative to the past year. That leaves the pair vulnerable to a squeeze lower if more weak eurozone data follows. The next domestic data point is the German manufacturing PMI due later this week. A similar miss would compound the pressure.

Next Catalyst: ECB Guidance and Services PMI

The ECB meets on June 6. The PMI miss raises the probability that President Lagarde signals a rate cut in July or September. Markets are currently pricing a 25-basis-point cut by September with a 60% probability. That could rise to 75% or higher if the services PMI also disappoints. Services have been the resilient pillar of the eurozone economy. If the composite PMI slips below 50, recession calls will intensify. Traders should watch the Eurozone Services PMI release on May 23 for confirmation or contradiction of the manufacturing weakness.

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The France PMI miss is not a one-off data point. It is the first hard evidence that the manufacturing slowdown is accelerating in the core of the eurozone. If the services sector follows, the ECB’s tightening cycle will end sooner than the central bank’s own forward guidance suggests. The next decision point is the May 23 services PMI and the June 6 ECB meeting. Both will determine whether EUR/USD holds 1.0800 or breaks lower toward 1.0700.