- EUR/USD has reacted to upbeat PMIs with a bounce from four-month lows.
- Dollar strength and virus issues will likely keep the currency pair depressed.
- Wednesday's four-hour chart is pointing to new falls.
A gasp for air before the next dive? That may be the picture emerging for EUR/USD as it benefits from upbeat figures but continues facing dark clouds.
Markit's preliminary Purchasing Managers' Indexes for March have smashed estimates, showing that businesses are upbeat about the upcoming recovery. The composite eurozone PMI topped 50 for the first time since September – finally pointing to growth. However, that may be a rosy view.
Germany, France and Italy have recently extended or reimposed restrictions due to a new wave of COVID-19 infections, hospitalizations and deaths. Citizens are growingly frustrated with lockdowns and with the EU's handling of vaccines. In turn, Brussels is trying to turn this anger toward pharmaceutical firms, mostly AstraZeneca, and its host country, the UK.
Officials at the bloc are mulling new curbs on exports of jabs and also raw materials, potentially resulting in fewer doses to go around. While talks with Britain may end in compromise, the picture is far from positive for the eurozone and the common currency.
Europe is also lagging in its economic response – and now with a fresh emphasis coming to a new American infrastructure program. According to reports, President Joe Biden's administration is working on a $3 trillion plan that would be presented in the next few days.
Treasury Secretary Janet Yellen remained mum on the topic in her testimony to Congress but may shed more light on it in Wednesday's appearance. Markets are watching the components of this program, closely watching its funding. Democrats may push for tax hikes, which dampen the market mood and push the safe-haven dollar higher. Moreover, the greenback is rising despite lower yields. Raising taxes means less debt issuance, and thus lower returns on Treasuries.
Why the dollar is rising while yields are falling, blame it on the taxman
Another factor to watch on Wednesday is America's Durable Goods Orders report for February, which is set to show an increase in investment.
US Durable Goods February Preview: Consumption to reflect labor market recovery
All in all, EUR/USD has more room to fall than to rise.
EUR/USD Technical Analysis
Euro/dollar has dropped below the previous 2021 trough of 1.1836, hitting a low of 1.1812 before bouncing. With momentum remaining to the downside on the four-hour chart and the Relative Strength Index holding above 30, bears remain in control.
Immediate support awaits at 1.1812, followed by 1.1750 and 1.1690 last seen in November.
Resistance is at 1.1875, a cushion from recent days, followed by 1.1910 and 1.1950.
Five factors moving the US dollar in 2021 and not necessarily to the downside
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Follow us on Telegram
Stay updated of all the news
AUD/USD storms through 0.6600 on risk rally as US averts default, NFP eyed
AUD/USD is extending its rally above 0.6600, helped by a risk-on market profile on the US NFP day. Investors cheer the Congressional approval of the US debt-ceiling suspension, which will avert a US default. China techs rally and broad US Dollar weakness aid the Aussie.
EUR/USD bulls flex muscles near 1.0780 hurdle amid mixed feelings of ECB, Fed hawks, focus on US NFP
EUR/USD clings to mild gains around 1.0760-65 as it lacks follow through of the previous day’s heavy run-up amid the market’s cautious mood ahead of the key US employment data. Softer Eurozone inflation, mixed comments from ECB officials prod Euro buyers.
Gold bulls can stay hopeful above $1,968, US NFP, Fed clues eyed
Gold remains around weekly top, grinds higher past key support confluence. Cautious optimism ahead of the US NFP, absence of major data/events prod XAU/USD bulls of late. Reconfiguration of Fed bets, optimism about US debt-ceiling deal keeps buyers hopeful.
Pro-XRP lawyer: Ripple losing the SEC lawsuit might be a blessing in disguise
XRP price made a decent recovery in the month of May, fueled by Ripple's chances of winning the lawsuit it is facing against the Security and Exchange Commission (SEC). The cryptocurrency has amassed a huge base of supporters, which might potentially expand further regardless of the outcome.
The June rate hike needle has been moved precipitously lower
Even though equity market investors had, for the most part, looked through the debt ceiling drama, US stocks still rallied in relief rally fashion as investors revelled after perhaps one of the most significant economic downside risks of the year had been skirted.