EUR/USD Daily Forecast – Euro Lifted by PMI Beat

The downside momentum in EUR/USD subsided yesterday and the pair is recovering higher today after purchasing manager survey data came in ahead of analyst expectations.

PMI data for the eurozone rose to a six month high with the services sector continuing to expand. Manufacturing continued to contract, the data showed, although the rate of contraction has slowed.

Chris Williamson, Chief Business Economist at IHS Markit commented that the expansion is being welcomed amongst fears of economic growth led by the Coronavirus. He added, however, that the full impact of the virus may not yet be apparent.

The US dollar index (DXY) has eased lower on the back of the euro area PMI data releases today and is set to close the day in the red to snap a prior four consecutive day bullish streak. The greenback has been on a tear as of late and has rallied in 12 out of the past 14 sessions.

CPI data out of Europe will be released next followed by US PMI data in the North American sessions. US housing data will be released as well and two Fed members will be speaking.

Technical Analysis

EUR/USD has advanced firmly higher in the early day although remains confined withing a range that began on Tuesday.

Upside resistance for the pair is seen at 1.0833 which marks a level that acted as support late last week and early this week. Further, the 50 moving average on a 4-hour chart is converging towards the level to create a confluence.

The momentum has been firm to the downside in the month thus far. At the same time, the pair is oversold and today’s positive PMI report might provide the catalyst for a further recovery.

A break above 1.0833 shows the next level of resistance at 1.0865. To the downside, the 1.0800 handle acts as the first level of support.

The gains in the single currency on the back of the PMI report have not been broad-based. The euro has made notable gains against the commodity currencies but has struggled against some of the other major currencies. Against the Swiss franc, for example, the euro continues to hold near a four and a half year low.

Bottom Line

• EUR/USD is seeing some reprieve after a sharp fall as eurozone PMI data continues to show positive momentum.
• The dollar is poised to close the day at a loss after posting gains every day in the week thus far.