- The data hint at a potential easing of the downturn in the eurozone economy.
- The eurozone economy is likely to contract again in the fourth quarter.
- The data showed a larger-than-expected drop in the number of Americans filing new jobless claims.
Positive Eurozone PMI data on Friday helped the euro to maintain stability, injecting a sense of optimism into the EUR/USD outlook. Data on Thursday hinted at a potential easing of the downturn in the eurozone economy.
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However, trading was muted due to holidays in the US and Japan. In particular, preliminary research has shown that the recession in Germany may be less severe than expected. Consequently, it overshadowed the poor figures for French business activity.
Michael Brown, strategist at TraderX, commented that while there is a slight improvement, it only suggests that things are getting a little less bad.
Moreover, the survey indicated that the eurozone economy is likely to shrink again in the fourth quarter. Saco Bank strategists noted: “EUR/USD rose above $1.09 but could face huge resistance at $1.096.”
Elsewhere, markets barely reacted to the surprise victory of anti-EU far-right populist Geert Wilders in the Dutch parliamentary election on Wednesday.
Meanwhile, the dollar index was down 0.14%, its first decline since Monday. The decline followed data showing a larger-than-expected drop in the number of Americans filing new claims for benefits last week.
Adding to concerns about the Federal Reserve, a University of Michigan survey on Wednesday showed that consumers expect higher inflation this month in both the short and long term. Accordingly, market expectations for a Fed rate cut in 2024 have declined. Futures now point to a 27% chance the Fed will cut its rate target at its March 2024 policy meeting.
EUR/USD key events today
- US S&P Global Services PMI
Technical Outlook EUR/USD: Trapped between 30-SMA and 1.0900 level.
On the technical side, the EUR/USD pair is trading in a tight range between the 30-SMA and the critical 1.0900 level. Bulls and bears are fighting for control at this level. However, a closer look at the price action before it reached the 30-SMA shows that the bulls were in control.
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This is also clear in the RSI. Although it has fallen below 50, it is trading above, indicating solid bullish momentum. Therefore, the bulls have a better chance to push the price above the SMA to retest the 1.0950 resistance level.
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