- Since the start of trading this week, the EUR/USD Euro to US Dollar price has been on an upward retracement path.
- Gains are stalling at the 1.0714 resistance level before settling around 1.0685 at the time of writing this analysis, as bulls seek further impetus to extend the upward retracement.
According to forex trading platforms, the Euro exchange rate rose against the US dollar after the release of a strong German services PMI reading that overshadowed another disappointment in the manufacturing sector.
Economic Outlook
The largest economy in Europe recorded a strong rise in service sector output, as the services PMI rose to 53.3 in April, beating expectations (50.6) and 50.1 in March. Standard & Poor's Global, the producer of the PMI report, said: "The German private sector has returned to growth at the start of the second quarter."
While manufacturing was disappointing (42.2 versus 42.8 expected), the services boom was enough to push the composite PMI into growth territory at 50.5, well above expectations of 48.6. The gains are being defended following the release of eurozone PMI indicators, which saw a service reading of 52.9 in April, up from 51.5 in March and ahead of expectations of 51.8. The manufacturing PMI was disappointing at 45.6, down from 46 and below expectations of 46.5, but the eurozone composite PMI came in at 51.5, ahead of the 50.8 expected by markets.
Overall, the eurozone economy is comfortably moving towards the growth zone, and this may negate any urgent need for the European Central Bank to cut interest rates. A group of ECB policymakers have indeed promised a rate cut in June, but the next cut in July could be delayed. Consequently, this could provide support for the euro, all other things being equal.
EUR/USD Technical analysis and forecast:
According to the performance on the daily chart, and despite the gains of the recent rebound, the general trend of the euro price against the US dollar EUR/USD is still bearish. Stability around and below the support level of 1.0600 will continue to support the bears to move further downward. Technically, the price of the currency pair may remain in narrow ranges until the announcement of important US releases, led by the GDP growth reading and then the US inflation reading, which is preferred by the US Federal Reserve Bank. Currently, the closest support levels for the EUR/USD pair are 1.0630, 1.0550, and 1.0480, respectively.
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