EUR/USD Forecast Ahead of US New Home Sales

Summary:

EUR/USD is rebounding after Thursday's plunge. Better-than-expected US new home sales could place it within a range in the near term.

EUR/USD has recouped most of its losses from Thursday’s session as the market digests the preliminary PMI numbers from the Eurozone and ECB’s interest rate decision. On Thursday, the European central bank left interest rates unchanged at 0.00%.

Furthermore, during a press conference ECB’S President Christine Lagarde indicated that maintaining “favorable financing conditions” over the course of the coronavirus pandemic is essential in supressing uncertainty in the market. Despite the progress made in Europe’s jab program and economies gradually reopening, the central bank sees tightening of its monetary policy as being premature.

On Friday, EUR/USD is rebounding as a reaction to Europe’s preliminary PMI numbers. Eurozone’s manufacturing PMI came in at 63.3 compared to the forecasted 62.0. the manufacturing activity in France and Germany also beat estimates at 59.2 and 66.4 respectively. Investors are now keen on whether the US preliminary manufacturing PMI will beat the expected 60.5.

Besides, the pair will be reacting to US new home sales. Analysts expect a reading of 886,000 compared to the previous 775,000.

EUR/USD Technical Outlook

On a 3-hour chart, EUR/USD is trading above the 25 and 50-day exponential moving averages. At the time of writing, the pair was up by 0.32% at 1.2054. It is likely to rise further to 1.2070, which has been an important resistance level. However, if the US manufacturing PMI and new home sales come in better-than-expected, it will not have enough energy to move past that resistance level. Subsequently, it will pull back as the bears target 1.2000. As such, it will remain range-bound between 1.2000 and 1.2070.

This thesis will be invalid if EUR/USD moves past the psychological 1.2000 and 1.2070 on the upside. If that happens, the levels to watch out for are 1.1980 and 1.2100 respectively.