EUR/USD Forecast: Correcting after testing the 1.1000 psychological resistance
|EUR/USD Current Price: 1.0954
- Mounting tensions between the US and China weighed on the market’s mood.
- Markit preliminary estimates for business output were better than anticipated but remained in contraction territory.
- EUR/USD continues to post higher highs daily basis, its bearish potential remains limited.
The EUR/USD surged 1.1008, a fresh three-week high, but closed the day in the red around 1.0950. The market’s sentiment remained sour throughout the day, although risk-aversion during US trading hours benefited the greenback. The dismal mood was triggered by comments from Chinese speaker for the National People’s Congress, Zhang Yesui, who said that China will firmly defend its interest if the US does something to undermine the country’s core interests.
In the data front, Markit released the preliminary estimates of May’s PMI for the Union and the US. In the EU, the manufacturing index improved from 33.4 to 39.5, while services output rose from 12 to 28.4. Despite upbeat figures, the European economy “remained stuck in its deepest downturn ever recorded,” according to Markit. In the US the manufacturing PMI recovered from 36.1 to 39.8, while the Services PMI recovered to 36.9 from 26.7. Initial Jobless Claims for the week ended May 15, which resulted at 2.43 million, slightly worse than the 2.4 million expected.
Friday is a quiet day in terms of data, as the ECB will publish the Minutes of its latest meeting, while the US won’t release relevant macroeconomic figures. The focus will remain on mounting tensions between Washington and Beijing and coronavirus-related headlines.
EUR/USD short-term technical outlook
The EUR/USD pair bottomed at 1.0936, above a static support level at 1.0920. The decline seems corrective after the test of the critical 1.1000 price zone. The 4-hour chart shows that the pair met buyers on a test of a sharply bullish 20 SMA, while technical indicators gyrated sharply lower, the Momentum now flat around its mid-line and the RSI at around 58. Overall, the bearish potential seems limited, but it could gather a firmer pace on a break below 1.0920 the immediate support level.
Support levels: 1.0920 1.0890 1.0850
Resistance levels: 1.0975 1.1010 1.1045
View Live Chart for the EUR/USD
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