EUR/USD analysis: political woes offset positive growth figures

Valeria Bednarik FXStreet

EUR/USD Current price: 1.0549

The greenback started the day with a strong footing, but pared gains and retreated from its daily highs following disappointing US data. Markit flash PMIs came in below previous month readings, with the services activity index down to 53.9 from 55.6 in January, whilst the manufacturing sector contracted to 54.3 from previous 55.0, both at fresh 2-month lows. The flash Composite PMI stands at 54.3. The positive momentum of the US currency that lasted until after US opening, was triggered by comments coming from FED's Harker, who said that he will back a March rate hike should he see additional evidence of rising inflation.

The common currency fell in spite of fresh evidence of an accelerating pace of economic recovery, undermined by political uncertainty. The EU composite PMI rose from 54.4 to 56.0 according to the Markit flash estimate for February, the highest since April 2011. Markit Services and Manufacturing indexes were well above market's expectations. Also, German's preliminary February Markit PMIs showed that the growth in the manufacturing sector expanded at the fastest rate in over three years, with the index up to 57 from previous 56.4. The services sector also grew at a solid pace, up to 54.4 from previous 53.4, leaving the Composite PMI at 56.1 from previous 54.8.

The EUR/USD pair settled around 1.0550 after trading as low as 1.0525, below the 1.0565 Fibonacci resistance, as the level stands for the 23.6% retracement of the post-US election slump, and seems poised to extend its decline according to technical readings, given that in the 4 hours chart, the price is far below a bearish 20 SMA, whilst technical indicators have barely bounced from oversold readings. The pair has bounced twice from the 1.0520 region, reinforcing the strength of the static support, and therefore anticipating a strong bearish extension, once the level gives up.

Support levels: 1.0520 1.0470 1.0440

Resistance levels: 1.0565 1.0600 1.0635

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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