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EUR/USD Daily Forecast – Euro Extends on Gains Following PMI Beat

Jignesh Davda

EUR/USD pushed sharply higher yesterday, wiping out nearly three-days of losses, and is seen extending on the momentum after data from the euro zone showed the economy recovering.

Survey data from purchase managers in both the manufacturing and services industry rebounded for a second consecutive reading. The services PMI came in at 47.3 versus 30.5 in May and the manufacturing PMI was reported at 48.2 from 35.6 at the prior reading.

France, in particular, had a reading above 50 which indicates its economy is growing although it should be noted that France was hit hard compared to others in prior months.

Chris Williamson, Chief Business Economist at IHS Markit noted that the data is indicative of a “substantial easing of the region’s downturn in June”. He added that the jobs market remains a concern and that GDP is expected to fall more than 8% in 2020.

Later in the day, the US will release its latest PMI figures which analysts expect to show a similar economic improvement.

Technical Analysis

EURUSD 4-Hour Chart

EUR/USD shows renewed momentum in the early week after posting a loss in the past two weeks. Yesterday’s gain has translated into a bullish engulfing candle which should keep the pair bid on dips in the session ahead.

The big hurdle that has kept the pair lower over the past few weeks is the 200-week moving average. It currently resides at 1.1332 and remains a major obstacle for bulls in the week ahead.

Technical support for the session ahead is seen at 1.1261 as this is a level that has acted as both support and resistance as of late. If the pair fails to hold above it, further support is seen at 1.1212, reflecting the June 12 spike low.

To the upside, resistance is found near 1.1350 as this level has held the pair lower on prior attempts earlier in the month.

Bottom Line

  • EUR/USD is showed renewed upward momentum on Monday and is extending on the gains on positive European data.
  • The latest PMI figures from the US will be released later in the day. Market participants will be looking to see if it shows the same trend as Europe.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire