EUR/USD Price Forecast: Optimism fuels EUR demand

EUR/USD Current price: 1.0463

• Eastern European countries offered support to Ukraine amid tensions with the US.
• The United States ISM Manufacturing PMI is foreseen easing to 50.5 in February.
• EUR/USD extends intraday gains above 1.0450, higher highs in sight.

The EUR/USD pair dipped below the 1.0400 threshold on Monday, trading as low as 1.0387 before regaining its poise. The pair stands at around 1.0460 ahead of Wall Street’s opening, with the US Dollar (USD) on the back foot amid a better market mood.

Asian shares rose following upbeat Chinese data as the country reported better-than-anticipated February Purchasing Managers’ Indexes (PMIs). The NBS Manufacturing index posted 50.2, improving from 49.1 in January and beating the 49.9 expected. The non-manufacturing index rose from 50.2 in the previous month to 50.4, also surpassing the anticipated 50.3.

European indexes also trade on a positive note, helped by the latest developments around Ukraine. After President Volodymyr Zelenskyy failed to meet with United States (US) President Donald Trump on Friday, Eastern European leaders rushed to support Ukraine on fears the US could retrieve its contribution to the battered country in its war against Russia.

On the data front, the Hamburg Commercial Bank (HCOB) released the final estimates of the Eurozone (EU) February Manufacturing PMIs. Most figures were upwardly revised, albeit within contraction levels. The final EU index was confirmed at 47.6, following a preliminary estimate of 47.3.

Additionally, the EU released the first estimate of the February Harmonized Index of Consumer Prices (HICP), which rose by 2.4% YoY, below the 2.5% posted in January, yet higher than the 2.3% expected.

The American session will be packed as S&P Global will release the February Manufacturing PMI ahead of the official ISM index. The ISM figure is foreseen at 50.5, down from the 50.9 previously posted.

EUR/USD short-term technical outlook

From a technical point of view, the daily chart for the EUR/USD pair shows bulls are taking over. Technical indicators advance within positive levels, suggesting higher highs are in sight. At the same time, the pair advanced beyond a mildly bullish 20 Simple Moving Average (SMA), now providing dynamic support at around 1.0425. Finally, a bearish 100 SMA provides resistance in the 1.0530 area.

The near-term picture is bullish. In the 4-hour chart, EUR/USD trades above all its moving averages, with a bearish 20 SMA converging with a flat 100 SMA around 1.0400/20. The 200 SMA, in the meantime, gains upward traction below the shorter ones. Technical indicators head firmly north, although the Momentum is yet to advance beyond the 100 mark. Nevertheless, the risk skews to the upside, with additional gains likely in the upcoming sessions.

Support levels: 1.0425 1.0380 1.0330

Resistance levels:  1.0490 1.0530 1.0560