EUR/USD Forecast: challenge of 1.2215 around the corner
|- EU business growth pared its decline, but remain at the lower end of the range.
- US Treasury yields soar to fresh multi-year highs, driving USD higher.
The EUR/USD pair is on a brink of breaking lower, as the dollar, led by resurgent yields, is the overall winner at the beginning of the week. The yield for the 10-year note touched 3.0% and holds nearby, while commodities and equities extend their latest decline. Yields are overshadowing positive EU data, as the April preliminary Markit PMI came above expected, but remained at the lower end of their recent range. According to the official report, business activity in the region continued to rise at a solid pace, though the rate of expansion remained considerably weaker than seen earlier in the year amid signs of weaker growth of demand and supply constraints. The manufacturing index for the Union resulted at 55.8 down from 55.9 in March and the lowest in 17 months. Services activity improved, with the index reaching its highest in two months with 55.0. The composite index stood unchanged at 55.2.
The US session will bring the preliminary April Markit and official PMI, expected around March final figures, alongside with Existing Home Sales for March. Yields will clearly keep on leading the way, particularly if the data comes in-line with expectations.
The pair is breaking below the daily ascendant trend line coming from March 1st, and nearing the low set this month with US Nonfarm Payrolls, at 1.2215. Technical readings are clearly bearish but that level needs to give up for bulls to give up. In the 4 hours chart, all of the moving averages are gaining downward strength, although the 20 SMA is crossing below the 200 SMA and nor far from the 100 SMA, with a strong downward angle that also suggests the decline is poised to extend. Below the mentioned 1.2215, the next strong support comes at 1.2160, with a break the level opening the doors for a test of 1.2100 a major static support level. From here, resistances come at 1.2260 and 1.2295 with a recovery above this last favoring additional gains and denying the bearish potential.
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