- Summary:
- The Eurozone reported growth in services and a significant decline in manufacturing in February, and this has pushed EURUSD below 1.0900.
EURUSD slid during the European trading session on Thursday, losing 0.26% to trade at 1.0893. The loss came after Eurozone PMI readings sent mixed signals, with the manufacturing PMI falling and services PMI rising. Traders have opted to bet on the dollar after weighing the implications of the PMI figures in the context of Wednesday’s Federal Reserve interest rate announcement.
The Fed maintained interest rates at their current 5.25%-5.50% level, in line with the prevailing market projection. Also, the Fed still expects three rate cuts this year, with the first one likely to come in June.
As there were no surprises, traders digested the FOMC announcement fast and were looking for volatility elsewhere. While the interest rate announcement did not shake the market, the high rates will continue to provide support to the dollar in the mid- term. FOMC also revised upwards its projections for US GDP growth in 2024 from 1.4% to 2.1%. This, too, will exert downward pressure on EURUSD.
The EURUSD currency pair’s upside got support from the Eurozone Composite PMI, which rose by 0.5 percentage point to 49.9, exceeding the forecast estimate by a marginal 0.2 percentage point. The services PMI saw the largest rise from 50.2 to 51.1, beating the forecast figure of 50.5. However, manufacturing contracted by 0.8 and missed the target by a wider margin of 1.3, bringing headwinds to EURUSD.
The Eurozone’s second-largest economy, France saw its manufacturing PMI decline from January’s 47.1 to 45.8, missing the forecast figure 47.5. Similarly, the country’s services PMI read 47.8, down from January’s 48.4, and lower than the consensus forecast of 48.8.
However, Germany’s economy performed better in February, as its Composite PMI reading beat forecast by 1.4 to reach 47.4. This was mostly helped by February services PMI rose by 1.5 percentage points to 49.8, beating the forecast figure of 48.8. However, the Manufacturing PMI fell from 42.5 to 41.6, and missed the forecast figure of 43.1.
US initial jobs claims readings will be out later on Thursday, and this could inject fresh impetus into the EURUSD market,
Technical analysis
The momentum on the EURUSD trading pair favours control by the sellers. The downside will continue if resistance remains at 1.0925. This could build selling momentum to breach the support at 1.0875, and possibly test 1.0855 in extension. Alternatively, a move above 1.0925 will put the buyers in control, with the resistance at 1.0940 in focus. Extended control by the bulls at that point will break the resistance and potentially test 1.0960.
