- Summary:
- The euro's gains on Monday were based on the dollar's weak fundamentals, but EURUSD will struggle on Tuesday as market waits for US PMI data.
EURUSD fell in the Asian session on Tuesday, erasing some of the gains made on Monday to trade at 1.2673 at press time. Traders have adopted a cautious approach ahead of key readings from the Eurozone and the United States, and this could keep the currency pair within constricted margins. The euro rose against the dollar on Monday, as the spillover effects of Friday’s PMI readings curtailed the greenback.
The EURUSD currency pair’s movement on Tuesday will largely depend on PMI figures from both the Eurozone and the US. The Eurozone’s three largest economies, Germany, France and Italy will release their February services and composite PMIs ahead of the combined Eurozone readings. This will provide hints as to whether the block’s economy is on a recovery path.
After missing the ISM Manufacturing PMI forecast, the US economy will issue its February ISM Non-Manufacturing PMI reading later on Tuesday. Also scheduled for release is the ISM Non-Manufacturing Prices PMI and the S&P Global Services PMI. The three readings will be critical to the dollar’s stability on Tuesday, as the market will read them in the context of the multiple less-than-expected figures last week. The dollar currently stands on shaky ground, with the falling yields on long-term US Treasuries exacerbating the matter.
Meanwhile, the dollar could get support from risk-off investors in the aftermath of the PMI releases as attention shifts to the scheduled testimony by Fed Chairman Jerome Powell. He is expected to face a myriad of questions from lawmakers when he presents the Semiannual Monetary Policy Report to Congress on Wednesday. Key among these will almost certainly be about the timeline for the current high interest rates and their impact on the economy.
Technical analysis
The EURUSD currency pair shows signs of choppiness, but the generally RSI lacks downward momentum. It has a pivot at 1.0835, and the buyers will need to keep the action above this level to move higher. They will likely encounter the first resistance at 1.0870, but a sustained control will break the barrier and possibly test 1.0885. However, the sellers could take charge if the rate moves below 1.0835. That could create momentum to break the 1.0820 support. Such a move would terminate the upside narrative, and set EURUSD on course to test 1.0795.
