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  • EUR/USD remains sidelined around multi-day high, flashed earlier in week.
  • US dollar consolidates recent losses amid small pick-up in yields.
  • Markets remain indecisive after US Jobless Claims propelled risk-on mood.
  • Eurozone, US PMIs for May eyed for fresh impulse.

EUR/USD grinds higher around 1.2230, up 0.05% intraday, heading into Friday’s European session. The currency major pair cheered upbeat market sentiment the previous day but a lack of major catalysts and cautious sentiment ahead of the PMI data from Eurozone and the US test the bulls afterward.

Even so, the US Treasury yields are on the way to post a second weekly run-up, which in turn exerts downside pressure on the quote amid a quiet session in Asia.

Thursday’s US Jobless Claims dropped from 450K forecast and 478K previous readouts to 444K for the week ended on May 14. The readings also take the four-week average down to 504.75K versus 535.25K prior. Following the data, White House Press Secretary Jen Psaki mentioned that the trend is clear on the declining unemployment claims. This helped traders to ignore Dallas Fed President Robert Kaplan, a non-voting member of the US Federal Reserve, as he reiterated the necessity for tapering.

The risk-on mood also took clues from the US-Egyptian efforts to broker peace between Israel and Palestine as well as recently easing coronavirus (COVID-19) numbers from Asia.

On the contrary, indecision over the Fed’s next move and recent jitters between China and Pacific nations seem to weigh on the quote, not to forget the market’s fears of another downbeat activity numbers for May, which in turn keep EUR/USD bulls in check.

Against this backdrop, S&P 500 Futures and stocks in Asia-Pacific print mild gains whereas the US dollar index (DXY) consolidates the previous day’s losses below the 90.00 threshold.

Given the sluggish markets and gradual opening of EU, as well as the US, economies, coupled with the boosting vaccinations, the preliminary readings of May month PMI from Germany, Eurozone and the US will be important for EUR/USD traders going forward. Forecasts suggest composite PMIs portray a better picture of Germany and the bloc versus easy activity in the US, which in turn could propel the quote on matching the market consensus.

“We expect the service sector will lead gains in Europe, underpinned by the improved vaccination program and gradual easing in restrictions in the euro area. The improving European growth outlook is reducing the likelihood that the ECB will maintain the current level of enhanced PEPP purchases beyond Q2, raising the likelihood that 10-yr bund yields could soon trade back above zero. That would provide a powerful signal of a sustainable improvement in the business cycle. By contrast, the PMI for the US is expected to ease slightly, implying growth momentum is in the euro’s favor at present,” said the Australia and New Zealand Banking Group (ANZ) ahead of the release.

Technical analysis

While the bullish MACD and sustained recovery from early month tops enable EUR/USD to cross the 1.2245 immediate hurdle, the resistance line of a two-month-old rising wedge bearish formation, around 1.2265-70, will test the pair’s further upside. Alternatively, pullback moves below 1.2165 nearby horizontal support could drag the quote to the support line of the stated rising wedge near 1.2115, a breaking which can drag the quote to the 100-day SMA level of 1.2042.

 

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