EUR/USD Forecast: local growth supports the EU, but 1.2000 still caps

Valeria Bednarik FXStreet

The EUR/USD pair surged to flirt with the 1.2000 level early Europe, as the common currency got a boost from upward surprises coming from the EU preliminary PMIs for September. According to Markit, economic growth regained momentum at the end of the third quarter, as for the whole region, the Composite PMI is up in the month at 56.7 from previous 55.7, the highest since May this year, when the index reached a six-year low. Manufacturing and Services activity, surged to the highest in over 75 months. ECB's President is scheduled to speak in a while, but he will probably avoid talking monetary policy, and if he comments something, will be an attempt to down talk the EUR. Later today, US PMI will grab market's attention.

Technically, the pair is holding right below the 1.2000 level, but the upward potential is limited according to the 4 hours chart, give that the price has settled above all of its moving averages that anyway head nowhere below the current level, while the Momentum indicator remains below its mid-line. The RSI indicator however, anticipates a possible upward extension, heading north around 60.

The 1.2000 level has been sort of a line in the sand for the ECB, with strength beyond the level triggering news headlines down talking chances of QE. The pair would need then to surpass the 1.2030 mark to gain short term momentum and extend its advance, at least short term, with next resistances then at 1.2070 and 1.2100. Below 1.1950, on the other hand, the pair could retreat down to 1.1910, where buying interest will likely re-surge.

View live chart of the EUR/USD

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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