EUR/USD Current price: 1.0842
- Primary elections in the United States may steal the show in the American afternoon.
- The US macroeconomic calendar includes the ISM Services PMI, which is expected to show continued expansion.
- EUR/USD keeps pressuring the upper end of its latest range, needs to clear a Fibonacci resistance level.
The EUR/USD pair spent the first half of Tuesday trading uneventfully, confined to a tight range around the 1.0850 level. The pair peaked at 1.0867 ahead of the Asian opening but was unable to extend gains beyond a critical static resistance level. Financial markets turned cautious ahead of the batch of macroeconomic data spread throughout the rest of the week and some political headlines with significant implications.
On the one hand, the Chinese government announced a series of macroeconomic targets to boost the battered economy. The country plans to run a budget deficit of 3% of the economic output for this year, down from a revised 3.8% in 2023. It also set the inflation target at 3% while pledging to maintain the unemployment rate at around 5.5%.
On the other hand, the United States (US) will hold primary elections, with 16 states and one territory voting candidates. Former President Donald Trump is running on the Republican side, while current President Joe Biden is the natural Democratic leader. Despite all the political and legal woes surrounding Trump, there's a good chance he will stand as the Republican candidate going into the polls in November.
Data-wise, the Eurozone released the January Producer Price Index (PPI), which contracted 0.9% MoM while falling by 8.6% on a yearly basis. The decline in price pressures should be understood as good news for the Union, although the figures had no real impact on the European Central Bank's (ECB) monetary policy decision. The central bank is expected to keep rates on hold when policymakers meet this Thursday.
The upcoming American session will bring the final estimate of the S&P Global Services Producer Managers Index (PMI), and the Composite PMI, expected to be confirmed at 51.4 and 53 respectively. Additionally, the Institute for Supply Management (ISM) will release the Services PMI, foreseen at 53.0, easing slightly from the previous 53.4.
EUR/USD short-term technical outlook
The EUR/USD pair shows no technical progress, maintaining the neutral-to-bullish stance in its daily chart. Sellers remain aligned around the 38.2% retracement of the 1.1139-1.0694 daily slide at 1.0865, while the downside is being protected by buyers standing at around the 23.6% retracement of the same slide at 1.0799. In the daily chart, the pair keeps developing above all its moving averages, although the 20 Simple Moving Average (SMA) is below the longer ones, reflecting the absence of solid buying interest. At the same time, the 100 and 200 SMAs converge in the 1.0830 area, lacking directional strength. Finally, technical indicators have lost their upward slopes and currently consolidate within positive levels.
For the near term, the EUR/USD 4-hour chart shows that bulls may finally take over. The pair develops above all its moving averages, with the 20 SMA gaining upward traction above the longer ones. At the same time, the Relative Strength Index (RSI) indicator consolidates around 57, while the Momentum indicator aims to resume its advance within positive levels. As long as the pair holds above the 1.0790/1.0800 region, bears will not have a chance.
Support levels: 1.0795 1.0750 1.0700
Resistance levels: 1.0865 1.0910 1.0950
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