- EUR/USD edges above 10-day SMA at 1.1266 ahead of London open.
- Overnight gains on Wall Street keep the dollar on the defensive.
- Charts signal bullish breakout but need validation from preliminary German and Eurozone PMIs.
The buying pressure around the single currency remains strong with EUR/USD currently printing session highs above the 10-day simple moving average (SMA) at 1.1266. The pair jumped more than 0.70% on Monday, snapping a four-day losing streak.
Focus on Eurozone data
The preliminary German Manufacturing PMI (Jun) is forecasted to rise to 41.5 from May's print of 36.6. A rise to 41.5 would mean deceleration in the pace of contraction in the manufacturing sector. An above-50 reading indicates expansion.
Similarly, Markit Manufacturing PMI (Jun) is expected to rise to 44 from 39.4 but remain in contraction territory below 50.00. While the German data is due at 07:30 GMT, the Eurozone number will be released at 08:00 GMT.
"Eurozone PMIs should be stronger with easier lockdown restrictions bolstering business activity. Unlike other parts of the world, the curve in the UK and Eurozone has remained relatively flat," BK Asset Management's Kathy Lien noted in her daily analysis.
A big beat on expectations may accelerate gains in the single currency. The falling wedge breakout seen on the pair's hourly chart suggests scope for a rise above the psychological resistance of 1.13.
The pair may face selling pressure if the European stocks decline for the second day. Stocks fell on Monday as an uptick in the German coronavirus infection rate fueled fears of another lockdown. However, Wall Street eked out gains, keeping the dollar on the defensive and allowing EUR/USD to print gains.
Technical levels
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