EUR/USD Forecast: The death cross pattern looms over the cautious recovery

The EUR/USD is trading around 1.17 in another calm day in financial markets.
Euro-zone PMI data did not rock the boat but the US figures certainly can.
The technical picture is gradually improving, apart from the death cross pattern.

Yohay Elam FXStreet

The EUR/USD is trading around 1.1700 in the second day of calm trading, something that has not characterized the pair in recent weeks. The Italian government is getting comfortable and in Spain, the freshly minted PM Pedro Sanchez is nominating his cabinet members. No imminent crisis is facing these debt-stricken countries. Fears about Italy's position in the euro-zone were left, right, and center last week.

Euro-zone purchasing managers' indices for the services sector came out within expectations. The euro-zone PMI hit 53.8 against 53.9 projected, no big change. Later today, the President of the German Bundesbank Jens Weidmann will speak.

The bigger elephant in the room remain's Trump's tariffs. The US Administration implemented steel and aluminum tariffs on the EU, Mexico, and Canada. Also here, nothing has happened in Europe but the sense of calm is probably false. The bloc is preparing retaliatory tariffs. It just takes a longer time. So far, trade issues have slightly helped the EUR/USD, but this is unlikely to last for too long.

Later today, the ISM Non-Manufacturing PMI will provide insights about America's wide services sectors. An increase is expected from 56.8 seen in April. See the preview: A pick up may trigger a resumption of the USD rally

Also note the JOLTs Job Openings, a lagging, yet an employment indicator eyed by the Federal Reserve.

EUR/USD Technical Analysis

EUR USD June 5 2018 technical daily chart

Downside momentum has waned and the RSI is gradually rising from the abyss and back to balanced territory. On the other hand, the 50-day Simple Moving Average is quickly falling towards the 200-day SMA. When the 50 crosses the 200 to the downside, the pattern is known as the "death cross". Will this doom the EUR/USD?

Support awaits around 1.1676, which was a swing low on the way down and also a low point seen on June 4th. Lower, the pair faces support at 1.1610 which was also a stepping stone towards the lower ground as well as the June 1st trough. 1.1550 was the November 2017 low and 1.1510 is the 2018 trough.

On the topside, 1.1726 capped the pair on several occasions on May 28th. They are followed by 1.1767 which was a low point in mid-May. The 1.1822 point was a swing low on May 9th.

More: EUR/USD Forecast: Already 200 pips off the lows, how high can it run?

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

GBP/USD surrenders some gains, back to 1.3420

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD turns positive, targets 1.1450

EUR/USD now picks up pace and advances toward the 1.1440 region on Friday, up modestly for the day. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold remains offered, still below $4,100

Gold struggles to extend Thursday’s rebound and navigates below the $4,100 mark per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.