Original article by Vladimir Zernov
Source: FX Empire
Title: U.S. Dollar Strengthens as Composite PMI Surprises to the Upside: EUR/USD, GBP/USD, USD/CAD, and USD/JPY Analysis
The U.S. dollar saw significant upward momentum on June 21, 2024, following the release of stronger-than-expected economic data. The latest S&P Global Composite PMI report exceeded analysts’ expectations, sparking a broad rally in the U.S. dollar across major currency pairs including EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
This article provides an in-depth technical and fundamental analysis of the major U.S. dollar currency pairs in light of the better-than-expected PMI data, underscoring key market reactions and potential trading strategies moving forward.
Highlights of PMI Report and Market Reaction
The U.S. Composite PMI, which combines data from both the Manufacturing and Services sectors, jumped to 54.6 in June, a clear beat compared to the predicted figure of 53.5.
This data point reinforces the narrative of a resilient U.S. economy, particularly amidst ongoing speculations regarding the Federal Reserve’s interest rate path.
Key takeaways from the PMI release:
– Manufacturing PMI rose to 51.7 vs 51.0 estimated.
– Services PMI increased to 55.1, well above the expected 53.4.
Both sub-components of the PMI report signal economic expansion (any figure above 50 indicates growth), suggesting robust business activity in both sectors. Consequently, the Forex market interpreted this data as a bullish sign for the U.S. dollar, solidifying the dollar’s strength across major pairs.
Let’s analyze the major Forex pairs affected:
EUR/USD: Downward Pressure Resumes
EUR/USD came under renewed selling pressure as dollar strength prevailed after the release of the PMI numbers.
– The pair hit lows near the 1.0670 region during the session.
– Technical levels show strong resistance at 1.0800 and support now lies at 1.0650.
– The euro remains fundamentally pressured by slower economic recovery in the Eurozone.
– The European Central Bank’s (ECB) more dovish tone compared to the Fed continues to weigh on the common currency.
Traders are also pricing in geopolitical risk in Europe, particularly with uncertainty arising from the upcoming elections in France and concerns over fiscal loosening by potential far-right victories. This overall narrative favors more USD gains in the short term.
Moving averages analysis:
– The 50-day EMA near 1.0780 acts as short-term resistance.
– A failure to reclaim 1.0700 could lead to a retest of previous lows around 1.0630.
GBP/USD: Edge Removed After Bullish Streak
The British pound, which had previously rallied on expectations that the Bank of England may pause rate cuts, eventually succumbed to broader dollar strength.
– GBP/USD slipped below the 1.2650 handle, testing intraday lows near 1.2620.
– Resistance points remain at the 1.2750 and 1.2800 zones.
– The pair had previously benefited from sticky services inflation in the UK, leading markets to push back rate cut expectations from the BoE.
Although recent UK economic figures showed inflation cooling somewhat, the services sector remains hot. Nonetheless, the U.S. PMI beat proved sufficient to curb GBP gains, as dollar bulls regained control of the pair.
From a technical viewpoint:
– A sustained move below 1.2600 opens the path to test 1.2550 and eventually 1.2500.
– Short-term traders will monitor RSI signals and MACD crossovers on the 4-hour chart for further directional clues.
USD/CAD: Oil Prices Can’t Save The Loonie
The Canadian dollar failed to benefit from a rebound in oil prices amid a stronger greenback and mixed domestic data.
– USD/CAD climbed back toward the
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