EURUSD rose significantly on Monday, gaining 0.3 percent in the intraday session to trade at 1.0724 in the New York session. The currency pair touched an intraday high of 1.0746, coming within touching distance of the important psychological barrier at 1.0750. The euro is recovering after a sentiment-driven selloff in the last two weeks as investors reacted to surprising results in the EU parliamentary elections.
The ECB indicated last week that it will have to wait a little longer to gather more data on inflation trajectory before slashing interest rates. Also, EURUSD lacked support from economic data, with its PMI data falling below expectations. The Eurozone’s HCOB Services PMI came in at 52.6 versus the forecast figure of 53.5 percent. Similarly, the Manufacturing PMI fell short of forecasts, reading 45.6 against 48.0 percent. This was reflected in the two largest economies in the Eurozone, with both Germany and France performing below expectations.
Meanwhile, the US PMI figures exceeded forecast estimates, bringing headwinds towards the EURUSD pair. Furthermore, the German Business Expectations reading declined in June, coming in at 89.0 from the previous month’s 90.3 and missing out on the forecast 91.0. In addition, the German Ifo Business Climate Index. This underlines the declined in June to 88.6, falling below the forecast reading of 89.4.
These figures do not augur well for the Eurozone’s largest economy whose recent data seem to be pointing to stagnation. Also, concerns over the forthcoming French elections will keep exerting pressure on EURUSD in the next two weeks. Looking ahead, however, the euro could find some traction as traders are likely to ignore much of the US economic data until Thursday, when the durable goods orders and PCE figures come out.
Technical analysis
The momentum on EURUSD points to control by the buyers if the exchange rate stays above 1.0710. That could see the first resistance encountered at 1.0730, above which the upward push could develop stronger momentum to test 1.0750 in extension. On the other hand, a move below 1.0730 will signal control by the sellers, and the first support will likely be at 1.0720. A break below that mark will invalidate the upside narrative, and could result in further decline to test 1.0700.
