EURUSD Outlook: The Upside Prevails Ahead of Powell Speech

Summary:

The Eurozone's strong PMI readings have put the euro in control, but the EURUSD trajectory could change during Jerome Powell's testimony.

EURUSD is up in early morning European trading session on Wednesday, as the Eurozone’s impressive macroeconomics support the euro’s resurgence. The EURUSD trading pair has been on an uptrend since February 14^th, and traded near two-week highs, at 1.0873 at the time of writing. Meanwhile, the dollar’s struggles are underpinned by a series of underwhelming macroeconomic data.

While the Eurozone’s PMI figures beat forecasts in February, the US figures fell below the estimations. The HCOB Eurozone Composite PMI read 49.2, beating the forecast 48.9. Similarly, the HCOB Eurozone Services PMI exceeded projections by 0.2 to come in at 50.2. On the other hand, the ISM Manufacturing PMI fell in February to 47.8 from January’s 49.1, and below the expected reading of 49.5. This was followed by a lower-than-expected ISM Non-Manufacturing PMI of 52.6, which missed the forecast figure by 0.4.

The EURUSD pair traders will have all their attention on the US economic fundamentals, as there aren’t any high-impact releases from the Eurozone on Wednesday. Two releases stand out in particular: first, the ADP Nonfarm Employment Change will be out. The reading is important, as it is considered a precursor to the official government-issued Nonfarm Payrolls (NFP) data scheduled for Friday. The second release will be the JOLTs Jobs Opening data, which is used as a barometer for the US labour market.

Meanwhile, Federal Reserve Chairman, Jerome Powell, will testify in Congress for two days, beginning Wednesday. The Q&A session during the Semiannual Monetary Policy Report presentation could trigger increased market volatility. That is because it typically provides clues on the US economic standing and monetary policy direction.

Technical analysis

EURUSD has a pivot at 1.0840, and the RSI indicator favours control by the buyers above that level. An extended control could see them break the 1.0890 resistance, enabling them to test the next resistance at 1.0910. However, a pushback by the sellers could see the pair head below 1.0840. Extended control by the sellers will break the 1.0825 support and invalidate the upside view. Furthermore, it could see the rate test the 1.0810 support.