EUR/USD Forecast: US Dollar subdued as stock markets pick up

Valeria Bednarik FXStreet

EUR/USD Current Price: 1.0318

EU S&P Global PMIs were slightly better than anticipated, but economic contraction continues.
US FOMC Meeting Minutes expected to provide clues on December monetary policy decision.
EUR/USD holds above 1.0300 but lacks follow-through ahead of US first-tier releases.

The EUR/USD pair found the strength to trade near 1.0350 early on Wednesday, as the positive tone of Wall Street weighed on the greenback while spreading over its overseas counterparts. However, and ahead of first-tier events, the pair retreated towards the 1.0300 price zone. Ahead of the US opening, stock markets maintain the green, with US indexes poised to open near fresh multi-week highs.

S&P Global released the preliminary estimates of its November PMIs, which showed that the Euro Area economy remains in contraction territory, although the figures beat the market expectations. The German services activity index printed at 46.4, while the Manufacturing PMI improved to 46.7. For the whole Union, the Services PMI resulted at 48.6, matching the October figure, while manufacturing output improved to 47.3 from 46.4 in the previous month. The official report brought a light of hope, as it showed that, despite the business sentiment remaining gloomy by historical standards, price pressures cooled amid weaker demand and easing supply constraints.

The US will offer multiple reports, with relevance increasing through the session. Initial Jobless Claims for the week ended November 18, and October Durable Goods Orders will be out ahead of Wall Street’s opening. Later, S&P Global will release the preliminary estimates of its November PMIs, with manufacturing output foreseen at 50, barely holding in expansion territory and the Michigan Consumer Sentiment Index for the same month. Later in the US afternoon, the focus will shift to the FOMC Meeting Minutes and potential clues on what the December monetary policy decision will bring.

EUR/USD short-term technical outlook

The EUR/USD pair bounced from an intraday low of 1.0296 and trades in the 1.0320 price zone, struggling to extend gains beyond the 23.6% retracement of its latest daily advance at around 1.0305. Technical readings in the daily chart skew the risk skewed to the upside, although the momentum seems limited. The pair keeps developing above a bullish 20 SMA, which extends its advance above the 100 SMA. At the same time, the Momentum indicator heads north within overbought readings while the RSI consolidates at around 62.

The near-term picture is neutral. In the 4-hour chart, a mildly bearish 20 SMA provides support around the aforementioned daily low while the longer moving averages advance far below the current level. At the same time, the Momentum indicator is crossing its midline into positive territory but with no follow-through, while the RSI indicator remains flat at around 54. The pair would have better chances on a break above 1.0350, the immediate resistance level.

Support levels: 1.0300 1.0245 1.0195

Resistance levels: 1.0350 1.0395 1.0440

View Live Chart for the EUR/USD

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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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