EUR/USD Forecast: Euro shows limited strength

ECB Accounts: Uncertainty surrounding the economic outlook had increased.
Eurozone PMI rises more than expected but remains in contraction territory.
The EUR/USD consolidates around 1.0900 as liquidity remains low.

Matías Salord FXStreet

The EUR/USD rose on Thursday in a quiet session. The pair is hovering around 1.0900 as volume remains low, indicating further consolidation in the market. The US Dollar Index lost ground on Thursday, providing support to the pair, driven by modest risk-on flows.

The Eurozone PMI improved in November, with the Manufacturing index rising to 43.8 from 43.4, surpassing the market consensus of 43.1. The Services sector also saw an increase, rising from 47.8 to 48.2. The German Composite PMI exceeded expectations at 47.1, up from 45.9. The Euro experienced a modest increase after the data, but the momentum did not last due to low trading volume. The figures are still below 50, indicating a contraction in the economy.

On Friday, Germany will report a new reading of Q3 Gross Domestic Product (GDP). Additionally, the ZEW survey is also due.

The minutes from the latest European Central Bank (ECB) policy meeting showed no surprises. Members highlighted that the uncertainty surrounding the economic outlook had increased since September, and they agreed that most indicators of underlying inflation appeared to have passed their peak. They also agreed that the ECB should continue to stress its determination to set policy rates at sufficiently restrictive levels for as long as necessary to bring inflation back to target in a timely manner. The accounts had no significant impact on the markets. ECB President Lagarde and other members of the Governing Council are scheduled to speak on Friday, but they are not expected to provide clear insights into monetary policy.

US markets were closed due to Thanksgiving, and Friday's session will be shortened. Thin trading conditions are expected to prevail. The US S&P Global PMI is due on Friday.

EUR/USD short-term technical outlook

The EUR/USD peaked at 1.0930 and then pulled back to stabilize around 1.0900. The pair is trading above all key simple moving averages (SMA). The 20-SMA is holding firmly to the upside, and the 100 and 200-day SMAs form an important support zone between 1.0790 and 1.0805. On the upside, the Euro needs a daily close above 1.0950 to clear the way for further gains.

On the 4-hour chart, the bias remains to the upside; however, technical indicators point to weakening momentum, which doesn't necessarily imply further decline but could indicate limited upside potential. Ahead of the Asian session, price action is expected to remain steady. A move above the 20-SMA at 1.0920 would strengthen the Euro. Relevant support levels are seen at 1.0890, followed by 1.0865.

View Live Chart for the EUR/USD

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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