EUR/USD Daily Forecast – Euro Eases Lower Following Services PMI DataEUR/USD is under a bit of pressure in the early day and is threatening a downside break from a range that has been playing out in the early week.
Euro Data Refreshes Economic Growth Concerns
PMI data out of Europe this week served as a reminder of slowing economic growth and set low expectations for the quarter.
Manufacturing data that was released yesterday continued to show a contraction in most European countries. Services data, which were released today, provided little encouragement.
Services have typically outperformed manufacturing so it was not a big surprise that all the countries reporting today held in expansionary territory. Although Italy is quite close to showing a contraction with a print of 50.4 in November, falling short of the estimate of 51.2
IHS Markit reported that today’s data signals 0.1% GDP growth in the last quarter of the year, with manufacturing creating a notable drag. While today’s figures steadied a bit from the last reading, the numbers are at the lower end of what’s been reported over the last five years.
This should keep pressure on inflation which will make the ECB’s task of price stability harder, despite all of its efforts.
EUR/USD has fallen into a range following a notable rally on Friday. The exchange rate is currently testing the lower end of this range where there is support.
Support stems from the 100-day moving average. Considering that Friday’s rally barely got above the indicator, this may not necessarily be strong support.
The recent upward momentum has led me to shift my bias to bullish. Further, I expect that dips in the pair will be bought.
The first level of support I am looking at on a 4-hour chart falls at 1.1053. This level held the downside in a range that played out around the middle of November.
Beyond that, there is confluence at 1.1028. This level marks a horizontal level that carries confluence with the 100 moving average on a 4-hour chart.
If the pair reverses higher, the main hurdle for the session ahead will be around the 1.1100 handle. This is the same area that held the pair lower in the middle of November.
- EUR/USD is facing mild selling pressure in the early day.
- Euro services PMI data held steady but continues to signal little GDP growth in the fourth quarter.
- Dips in the EUR/USD are likely to be bought after the momentum-driven rally on Friday.