**EUR/USD Holds Near Recent Lows as Traders Eye Eurozone PMIs**
*By FXStreet Team*
The EUR/USD currency pair remains under pressure this week, holding close to recent lows as traders brace for the release of key economic data from the Eurozone, particularly the Purchasing Managers’ Index (PMI) figures. This stagnation in movement illustrates not just fundamental economic divergence between the Eurozone and the United States, but also underscores broader market sentiment that has leaned towards a stronger dollar amidst ongoing geopolitical tensions and policy tightening by global central banks.
Here’s a detailed look into the latest developments shaping the EUR/USD market ahead of upcoming Eurozone data, particularly the PMI figures scheduled for release this week.
**1. EUR/USD Technical Picture and Broader Market Context**
– The EUR/USD has been trading in a generally downward trajectory, recently struggling to hold above the 1.0600 threshold. While short-lived rallies have occurred, significant resistance has capped bullish momentum.
– The pair faces structural resistance at 1.0650 and more solid obstacles around 1.0720. On the downside, immediate support lies near 1.0550, with further potential losses opening the way towards the 1.0500 psychological barrier.
– From a trend viewpoint, the pair remains in a bearish formation on longer timeframes, including the daily and weekly charts. Price action continues to form lower highs and lower lows, consistent with a downtrend.
– Moving average indicators, particularly the 20-day and 50-day simple moving averages (SMAs), remain above the current price, demonstrating bearish crossover formations that confirm downside momentum.
**2. Market Sentiment and the Role of Safe Haven Flows**
– Persistent geopolitical concerns, particularly conflicts in the Middle East and Eastern Europe, have intensified investors’ appetite for safe haven assets such as the U.S. dollar. This has resulted in broader dollar appreciation, thereby pressuring the euro lower.
– Alongside geopolitical threats, wavering global equity markets and rising yields in U.S. Treasuries signal investors’ cautious stance, contributing further to flows into the dollar.
– Additionally, soft economic prints in the Eurozone compared to strong U.S. data continue to fuel the divergence theme, positioning the dollar as a preferred holding.
**3. Anticipation Builds for Eurozone PMI Reports**
– PMI figures set to be released later this week are expected to provide crucial insight into the Eurozone’s economic trajectory. Composite, manufacturing, and services data are all under scrutiny, with particular focus on Germany and France, the bloc’s two largest economies.
– Analysts expect the manufacturing PMI to remain in contractionary territory. While any uptick would be welcomed, few anticipate a return to expansion in the near term.
– The services sector, while more resilient, faces growing pressure from high inflation and weakened consumer confidence.
– If PMI results surprise to the upside, even marginally, this could lend support to the euro in the short term. However, if the figures miss expectations, the EUR/USD could drop below recent lows, potentially testing the 1.0500 region.
**4. ECB Positioning: Hawkish Rhetoric Under Scrutiny**
– Officials at the European Central Bank (ECB) have continued to maintain a hawkish tone, emphasizing their commitment to restoring price stability through further rate hikes if necessary.
– However, markets appear skeptical about the ECB’s ability to tighten much further given ongoing economic stagnation in member states like Germany and Italy.
– Inflationary pressures within the Eurozone have waned slightly, but still remain well above the ECB’s two percent target, suggesting that monetary tightening may not yet have reached its conclusion.
– Upcoming guidance from ECB policymakers following the PMI release will be scrutinized, as markets seek clarity on the central bank’s dual goals of inflation control and economic stability.
**5. US Dollar Strength Continues with Fed Policy Outlook**
– On the other side of the Atlantic, the U.S. dollar continues to benefit
Read more on EUR/USD trading.