EUR/USD Forecast: Corrective advance could continue up to 1.0900
|EUR/USD Current Price: 1.0849
- Markit preliminary PMI estimates for the US disappointed, triggering a corrective USD slide.
- Manufacturing activity picked up in Germany and the EU in February.
- EUR/USD stalled around the 23.6% retracement of its latest daily slump.
The American dollar finally gave up on Friday, easing against most major rivals on the back of dismal US data. After hitting a fresh multi-year low of 1.0777, the EUR/USD pair finished the week with modest gains at around 1.0850. The shared currency began recovering with the release of the preliminary estimates of February Markit PMI, most encouraging. Manufacturing activity picked up in Germany and the EU, with the index for this last at 49.1. Both held within contraction territory. Services output in the Union remained in expansion levels, although the German index fell to 53.3.
In the US, on the other hand, the figures disappointed. Services output contracted to 49.4, while the Manufacturing PMI came in at 50.8. The Composite PMI fell to 49.6, in contraction territory for the first time since October 2013. The figures helped triggering profit-taking ahead of the weekend, particularly as the greenback was extremely overbought. The pair’s bounce, however, fell short of changing the technical bearish stance.
At the start of the new week, Germany will release the February Business Climate Survey, seen at 96 from the previous 95.9. The US will publish the Chicago Fed National Activity Index and the Dallas Fed Manufacturing Business Index.
EUR/USD short-term technical outlook
The daily chart for the EUR/USD pair shows that it settled just below the 23.6% retracement of its latest daily decline at around 1.0850. The corrective recovery could continue, but technical readings indicate that bears are still in control. Technical indicators in the mentioned chart have barely corrected extreme oversold conditions, while the 20 DMA maintains its firm bearish slope, converging with the 50% retracement of the same slump around 1.0930. In the shorter term, and according to the 4-hour chart, the pair settled above a now flat 20 SMA for the first time since early February, although the larger moving averages retain their bearish slopes well above the larger one. Technical indicators have reached overbought levels, where they have started to lose strength.
Support levels: 1.0770 1.0725 1.0690
Resistance levels: 1.0860 1.0900 1.0930
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