- Recent ISM data indicates continued contraction in manufacturing, leading to a 0.68% rise in EUR/USD.
- Trump’s new tariff threats against China and metals are pushing investors away from the dollar.
- EU’s Sefcovic is set to meet USTR Greer in Paris as trade tensions escalate across the Atlantic.
During the North American session, EUR/USD climbed, hitting a six-week peak of 1.1449. It seems likely to maintain above 1.1400 as the dollar weakens, reaching its lowest point since April amid ongoing trade issues with China and the Eurozone, prompting investors to favor the Euro.
Recent economic data from the U.S. suggests that manufacturing sector activity remains in decline, according to the Institute for Supply Management (ISM).
Last week, President Trump claimed China breached its agreement with Switzerland, threatening a 50% tariff on aluminum and steel imports starting June 4th. This has led to a shift towards safer assets.
In response, Beijing remarked that they would retaliate with “strong and unfounded measures.”
In related trade news, EU trade commissioner Sefcovic is slated to meet with USTR Greer this Wednesday in Paris, as confirmed by his spokesperson.
The EU’s economic calendar features the May release of the HCOB Manufacturing Purchase Manager Index (PMI), which showed mixed results, with only Spain indicating growth.
EUR/USD Daily Market Movers: Euro Extends Rally Past 1.1400 Towards 1.1450
- The ISM Manufacturing PMI dropped from 48.7 to 48.5 in May, marking a low not seen since November. While the price index experienced a growth of 69.4%, the employment index slightly improved from 46.5 to 46.8.
- The S&P Global Manufacturing PMI remained in expansion but fell from 52.3 in April to 52.0.
- Federal Governor Christopher Waller adopted a more cautious tone, noting the possibility of interest rate cuts later this year while emphasizing the importance of controlling inflation.
- The Eurozone’s May HCOB manufacturing PMI lingered in recession territory at 49.4, though it still marked the highest reading in nearly three years. The German manufacturing PMI was revised downward from 48.8 to 48.3, underlining a persistent weakness in the largest economy of the region.
- EUR/USD traders should prepare for a busy economic week ahead. The EU docket will include inflation statistics, the ECB’s monetary policy insights, and press conferences led by ECB President Christine Lagarde. In the U.S., attention will be on non-farm payroll data, the ISM Services PMI, and remarks from Federal Reserve officials.
- Market participants appear to have fully factored in predictions that the ECB will reduce deposit facility fees to 25 basis points at the upcoming monetary policy meeting.
Euro Technical Outlook: EUR/USD Surpasses Major Resistance Levels, Buyers Eye 1.1500
The daily chart indicates a continued upward trend in EUR/USD. However, unless buyers can maintain higher prices, this trend might stall. The relative strength index (RSI) is bullish, suggesting buyer control, but impending ECB monetary policy announcements could introduce volatility.
If EUR/USD climbs above 1.1450, it could challenge the year-to-date peak of 1.1573 recorded on April 21st. Conversely, should the Euro weaken and dip below 1.1400, initial support would be at 1.1350. Falling below that level could expose the 1.13 simple moving average (SMA) and the 20-day SMA at 1.1277.
