EUR/USD Forecast: Dismal EU data takes its toll on the shared currency
|EUR/USD Current Price: 1.0785
- EU’s economic activity contracted much more than anticipated in April.
- US Initial Jobless Claims for the week ended April 17 at 4427K, worse than expected.
- EUR/USD bearish and heading toward the 1.0700 price zone.
The EUR/USD pair fell to a fresh 3-week low of 1.0755 this Thursday, undermined by worse than expected macroeconomic figures. Markit released the preliminary estimates of April PMIs which posted record contractions, amid the coronavirus-related lockdown. The German manufacturing index fell to 34.3 while services output contracted to 15.9. For the whole Union, the manufacturing PMI resulted at 33.6, while the services index plunged to 11.7, all record lows. Also, the German GFK Consumer Confidence Survey for May plummeted to -23.4 against the previous 2.7.
Meanwhile, the ECB announced that it would accept some junk-rated debt as collateral to mitigate the impact of possible rating downgrades on collateral availability. The central bank added that it “may decide further measures if needed.”
The pair remains under pressure after the US released Initial Jobless Claims for the week ended April 17, which resulted at 4427K worse than the expected 4200K but better than the previous 5237K. Later today, Markit will release the preliminary estimates of the US April PMIs. The manufacturing index is foreseen at 38 from 48.5, while the services one is expected at 31.5 from 39.8.
EUR/USD short-term technical outlook
The EUR/USD pair is trading at around 1.0780 ahead of the US opening, unaffected by the latest American data. The pair is technically bearish, extending its decline into fresh lows and moving further below a daily descendant trend line coming from 1.1147. In the 4-hour chart, moving averages gain downward traction above the current level, also indicating increased bearish pressure, as technical indicators hold below their midlines, the Momentum flat but the RSI heading south around 34.
Support levels: 1.0750 1.0710 1.0680
Resistance levels: 1.0790 1.0830 1.0865
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