Bearish view
- Sell the EUR/USD pair and add a take-profit at 1.0635.
- Add a stop-loss at 1.0740.
- Timeline: 1-2 days.
Bullish view
- Buy the EUR/USD pair and set a take-profit at 1.0740.
- Add a stop-loss at 1.0650.
The EUR/USD pair bounced back after the mixed European and US flash manufacturing and services activity data. It rebounded to a high of 1.0700 also as the ongoing geopolitical risks started to fade.
Business output and geopolitical risks
The US dollar index retreated as traders embraced a risk-on sentiment as geopolitical risks eased. Activity in the Middle East shows that the tit-for-tat actions between Iran and Israel has stopped for now.
As a result, the price of crude oil has dipped slightly in the past few days, with Brent moving to $88 and the West Texas Intermediate falling to $83.25. Gold, which jumped to a record high as the risks escalated, has also pulled back to $2,300.
Similarly, global stocks have bounced back as the earnings season continues. In the UK, the FTSE 100 index has jumped to a record high while in the US, the Dow Jones and the Nasdaq 100 indices rose by over 1%.
The pair also rebounded after the encouraging business output data from Europe. In a report, S&P Global said that the bloc’s composite PMI rose to 51.4, the highest point in eleven months. This rebound was mostly driven by the services sector, whose PMI jumped to 52.9. It was also dragged by the manufacturing sector as the PMI dropped to 45.6.
These numbers mean that the European economy is in a moderately good shape now that inflation is falling while economic output is increasing. Most analysts expect that the ECB will start cutting interest rates in June. In a statement, the head of the German central bank said that he supported a rate cut in June only if data shows that inflation is moving downwards.
The EUR/USD pair also bounced back after a weak US PMI report. Data showed that the composite PMI dropped to 50.9 as the manufacturing figure moved back to the contraction zone of 49.9. On a positive side, new home sales jumped to 693k in March.
EUR/USD technical analysis
The EUR/USD pair bounced back after the latest US and European PMI numbers. It rose and retested the crucial resistance point at 1.0700, its first resistance of the Woodie pivot points. The pair also retested the key point at 1.0695, its lowest swing on Valentine’s Day. This is a sign of a break and retest pattern.
It also moved to the upper side of the bearish flag pattern, which is usually a sign of continuation. Therefore, the outlook for the pair is bearish, with the next point to watch being the lower side of the bearish flag pattern at 1.0612.
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