Hawkish comments from FED's Harker, who said that he would support a rate hike next March if inflation continues gaining momentum, boosted the dollar across the board, resulting in the EUR/USD pair breaking back below the 1.0600 figure, accelerating its decline with London opening, down to a daily low of 1.0557. Strong data coming from the EU halted the decline, but so far was not enough to trigger a decent bounce.
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 Markit Composite Eurozone PMI registered 56.0 in February, according to the preliminary ‘flash’ estimate, also beating previous and expected, on accelerating growth in the manufacturing and services sectors.
The US Federal Reserve will release the Minutes of its latest meeting this Wednesday, while a couple of policymakers will be offering different speeches in separated events this Tuesday. If the hawkish tone persists, and odds for a March hike rise, the EUR/USD pair can break below last week low of 1.0521.
From a technical point of view, the 4 hours chart shows that the bearish momentum persists, as indicators keep heading south, despite being in oversold territory. Additionally, the price is developing below all of its moving averages, with the 20 SMA gaining downward strength around 1.0630, whilst the price is holding below 1.0565, the 38.2% retracement of the post-US election slide.
Below 1.0520, the pair has scope to revisit January 11th low of 1.0453, en route to the 1.0400 level. A recovery above 1.0590 would ease the bearish pressure, but the pair needs to advance beyond 1.0635 to turn positive, at least in the short term.
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