EUR/USD Daily Forecast – Euro Attempts to Recover Following PMI Data BeatEUR/USD rallied in the early day after German and French PMI data pointed to growth. However, the pair struggles to hold gains as the rest of the euro area showed signs of weakness.
EUR/USD fell sharply after the ECB meeting yesterday and is attempting a recovery in the early day on Friday after the release of European PMI data.
The ECB will be starting a strategic review that is expected to last until December. It is the first review in 16 years and subjects such as the inflation target will be taken into consideration, and possibly altered.
The European Central bank left rates unchanged at the meeting yesterday and the press conference did not reveal much. There was some discussion of steps taken by the bank to incorporate climate change concerns in the investments they are responsible for. Investors may need to wait until there’s progress in the review before gaining more insights into the future of monetary policy.
In the meantime, policy decisions are likely to remain on hold which weighed on the single currency. EUR/USD declined below an important technical support confluence on Thursday which stands to keep the pair under pressure over the new few weeks.
A survey of purchasing managers in Germany and France revealed optimism towards the manufacturing and services sectors, triggering a recovery rally in EUR/USD. However, the gains were not sustained and the pair retreated ahead of PMI data that covers the entire euro area. The latter release was less upbeat and revealed that growth in the big 2 economies (France and Germany) are holding up the rest of the euro area.
EUR/USD was slow to react to the ECB meeting yesterday but eventually broke through a major support confluence.
The confluence consisted of a horizontal level at 1.1072, a rising trendline from the October low, and the 100-day moving average. The downside break sets a bearish tone for the pair.
Today’s recovery rally was promptly sold off and any attempts towards the spike high set during the German and French PMI release, at 1.1061, are likely to be met by sellers.
The next immediate support level for the pair is found at 1.1024 although recent price action suggests the exchange rate will look to test the psychological 1.10 handle once again.
- Thursday’s ECB meeting triggered a bearish break offering a strong sell signal
- Better than expected PMI data out of Germany and France failed to trigger a sustained rally in the pair.