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James Hyerczyk

The Euro is trading slightly better on Monday, but off its high for the session as sellers came in as the single-currency approached Fibonacci level resistance. Additionally, economic data from Europe indicated the worst may be over for Euro Zone factories, but the recovery may be slow.

Later in the session at 14:00 GMT, traders will get the opportunity to react to U.S. ISM Manufacturing PMI data. It is expected to come in at 43.5, up from 41.5 but below the key 50 level. A move above 50 indicates expansion. A number below 50 signals contraction.

At 11:17 GMT, the EUR/USD is trading 1.1114, up 0.0006 or +0.05%.

Euro Zone manufacturers appear to have passed their nadir, a survey showed on Monday, but activity is still contracting sharply as government-imposed lockdowns due to the coronavirus pandemic keep demand in check, according to Reuters.

After crashing to its lowest reading in the survey’s nearly 22-year history in April, IHS Markit’s Manufacturing Purchasing Managers’ Index (PMI) recovered somewhat last month.

It rose to 39.4 in May from April’s 33.4, still a long way from the 50 mark that separates growth from contraction and just below an earlier flash reading of 39.5.

“The manufacturing downturn looks to have bottomed out in April, with production falling at a markedly slower rate in May,” said Chris Williamson, chief business economist at IHS Markit.

“The improvement in part merely reflects the comparison against a shockingly steep fall in April, but more encouragingly was also linked to companies restarting work as virus lockdowns were eased.”


Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier in the session when buyers took out the March 27 main top at 1.1147. A trade through the nearest swing bottom at 1.0871 will change the main trend to down.

The main range is 1.1496 to 1.0636. Its retracement zone at 1.1066 to 1.1167 is controlling the longer-term direction of the EUR/USD. The single-currency is currently trading inside this zone.


Daily Swing Chart Technical Forecast

Based on the early price action and the current price at 1.1114, the direction of the EUR/USD the rest of the session on Monday is likely to be determined by trader reaction to Friday’s close at 1.1108.

Bullish Scenario

A sustained move over 1.1108 will indicate the presence of buyers. If this move creates enough upside momentum then look for a drive into the Fibonacci level at 1.1167. This is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under 1.1108 will signal the presence of sellers. This move could lead to a test of the major 50% level at 1.1066. This is also a potential trigger point for an acceleration to the downside.

For a look at all of today’s economic events, check out our economic calendar.
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