- At the start of this week's trading, the EUR/USD price stabilized lower from its five-month high, with losses extending to the 1.0781 support level, abandoning last week's gains, which reached the 1.0955 resistance level.
- Euro selling pressure increased in the last trading hours as investors assessed the latest PMI data and ECB officials' statements.
- Recent surveys indicated that private sector activity in the Eurozone grew at its fastest pace since August, although growth did not meet market expectations, as a rebound in industrial output was partially offset by a slowdown in the services sector.
Euro Affected by Signals About the ECB's Future Policies
Meanwhile, ECB official Cipollone indicated that the rationale for interest rate cuts is strengthening, as inflation may slow faster than expected. His colleague Stournaras echoed this view on Friday, stating that all indications point to a cut in April. In addition, ECB President Lagarde warned of weak economic growth, but downplayed inflation risks if the EU responds to US tariffs, indicating that the ECB will not respond by raising interest rates. De Guindos from the ECB also reinforced the view that the central bank has room for further easing of borrowing costs.
Trading Tips:
Keep in mind, as we have often advised before, that the EUR/USD gains are prone to collapse, which has happened recently, and this strategy still stands. Decisively, this week's trading may be quiet most of the time.
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Will the EUR/USD Rise in the Coming Days?
According to forex market trading and currency market experts' forecasts, even after this remarkable recovery, the EUR/USD pair still has bullish potential in the coming months, supported by a flow of negative news for the US dollar and positive news for the euro.
However, at the beginning of this week's trading, the euro suffered another setback, as the Eurozone's PMIs came out disappointing. According to the Economic Calendar data, the Eurozone's services PMI came in at 50.4, below expectations of 51 and below February's reading of 50.6. The manufacturing sector remained in contraction at 48.7. Meanwhile, the composite PMI came in at 50.4, slightly above the previous reading of 50.2.
Generally, attention was focused on the German figure, where there were hopes that the government's "Bazooka" spending program would boost sentiment. However, these hopes were not fully realized. The German services PMI came in at 50.2, below expectations of 51.4 and even below February's reading of 51.1. Meanwhile, the manufacturing sector recovered from 46.5 to 48.3, leaving the composite PMI at 50.9, below expectations of 51.2.
Overall, this result is somewhat disappointing in light of the recent optimism surrounding the euro, and a reminder that the benefits of German fiscal stimulus will be felt over the long term.
EUR/USD Technical Analysis Today:
According to recent trading, the EUR/USD price has retreated from its highs, but the general trend remains positive. The EUR/USD exchange rate is trying to break a three-day losing streak. These losses represent a retreat from the 1.0946 resistance level, which was tested twice last week and rejected. The failure to break the ceiling follows a significant US dollar sell-off and a surge in positive sentiment towards the Euro, linked to hopes that Germany will push the Eurozone economy into a new phase of growth.
However, this movement has reached its short-term limits, and we are seeing failures in other USD-related exchange rates, confirming a return of widespread dollar buying, with the market pausing its 2025 selling before the April 2 tariff announcements. In general, this "calm" may be the dominant feature of this week, and further losses are likely in the EUR/USD pair, with markets likely becoming more concerned about the reciprocal tariff announcements scheduled for April 2. Accordingly, the first downside target is at the 1.0760 chart support level, and if the sell-off continues this week, the 200-day EMA at 1.06678 will come into play.
In a broader view, while the exchange rate trades above the 200-day EMA, it is in an upward trend, and any pullbacks are expected to eventually make way for new highs over multiple weeks. If the US dollar weakens again, the 2025 high of 1.0946 is likely to be retested before rising to the 1.12 resistance over multiple weeks.
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