We have entered a new bullish trading week for EUR / USD. The gains of the bounce were capped by a move towards the 1.2245 resistance level, the highest for the currency pair in three months, and closed the week's trading flat around the 1.2180 level. This is in light of the continuation of the general upward trend. The single European currency received strong momentum against the rest of the major currencies by the end of the week, after the IHS Markit PMI surveys indicated that major European industries returned to growth in May. This is effectively raising expectations for a strong economic recovery that is seeing some analysts taking the EUR / USD pair to a peak of 1.25 this summer.
Data measuring a range of indicators indicates that the German service sector has returned to growth this month while activity among manufacturers has slowed, although activity and production from the recent industry have already reached record levels in recent months. It was the French industry that surprised the most and contributed the lion's share to the rise in PMIs for the eurozone as a whole, as the French services PMI rose to one of its strongest levels for years while manufacturers benefited from easing restrictions on activity at home as well as recovery processes elsewhere
Klaus Festissen, Chief Economist for the Eurozone at Pantheon Macroeconomics, points to German PMIs: “These numbers are strong, albeit a little less good than they are in France.” "The chart shows that GDP growth in France rebounded in the first quarter, and based on PMIs, and the improvement in the trend in HIV cases, the economy will build on these gains in the second quarter."
According to the results issued, the French Manufacturing PMI rose from 58.9 to 59.2 this month - a record high - while the services sector has returned to growth with the PMI comfortably rising above the 50 level indicating the difference between industrial growth and contraction for the first time since July of last year. For the Eurozone as a whole, the manufacturing boom has stabilized this month with the IHS PMI dropping from a record 62.9 to 62.8, and although the services sector on the continent, as in France and Germany, has appeared on its way back to growth.
The Services PMI rose from 50.5 last month to 55.1 in May, in conjunction with a temporary easing of activity restrictions in some of the bloc's major economies and refining economists' hopes that the current quarter will achieve a sustainable return to growth. Commenting on the numbers Holger Schmidding, Chief Economist at Berenberg, said: “With strong monetary stimulus, an adequate fiscal response and strong global demand, Europe is on the right track for a strong recovery from the Covid-19 recession. As the winter wave of the pandemic subsides, the gradual easing of restrictions supports a rapid recovery in the services sector as well as exceptional growth in manufacturing.
The dollar rose slightly and the euro fell in addition to other currencies when the US Federal Reserve meeting minutes in April indicated that some US interest rate makers believed it might be appropriate at some point in the coming months to start a discussion about when it might be the best time to begin to finish the bank's $ 120 billion monthly quantitative easing program. This could mean higher US bond yields, which are likely to enhance the attractiveness of the dollar, especially in light of Washington’s plans to spend trillions more over the coming years on infrastructure and other initiatives in addition to the pandemic-related spending.
According to the technical analysis of the pair: The general trend of the EUR / USD currency pair is still bullish, and as I mentioned before, I confirm now that there will be no exit from the current ascending channel without breaching the current psychological support of 1.2000. Continued optimism about the reopening of European economies and progress in the pace of vaccination against the Corona virus will continue to support the gains of the euro. The calm of this optimism may result in profit-taking selling, especially with the breach of the resistance at 1.2200, which is what we currently prefer, and we think that the most appropriate resistance levels to do so are 1.2235, 1.2300 and 1.2365, respectively. Today's currency pair is not anticipating any important and influential economic data, whether from the Euro-Zone or from the United States of America. Accordingly, investor sentiment will be the strongest influence on the direction of the currency pair
