- The EUR/USD is up over 0.50% amidst US services sector contracts and underwhelming private employment reports.
- Trump has increased tariffs on steel and aluminum. Investors are waiting for clarity in discussions between Xi and the US.
- Mixed PMI and soft inflation data from the eurozone could lead to a rate decrease by the ECB in Thursday’s meeting.
The EUR/USD moved upward on Wednesday, gaining over 0.42% as the US dollar gave back its Tuesday gains. This development, coupled with ongoing trade war uncertainties, pushed the pair beyond the 1.1400 level after hitting a low of 1.1356.
On Tuesday, President Trump signed an executive order effective June 4, increasing tariffs on steel and aluminum from 25% to 50% for most nations, with the UK being an exception. Traders are now looking ahead to a call between Trump and Chinese President Xi Jinping later this week, as reported by the White House.
Recent US data showed a slowdown in business activity within the services sector, according to the Institute for Supply Management (ISM). Additionally, the ADP report indicated that private sector hiring in May fell short of expectations.
In the eurozone, the HCOB Services and Combined Purchase Managers Index (PMI) displayed mixed performance, with some areas showing growth while others remained in contraction. This might prompt the European Central Bank (ECB) to cut rates by 25 basis points at its upcoming June 5 meeting, particularly following last Tuesday’s inflation report.
The EU’s Economic Docket will release inflation data from producers, alongside the ECB’s decision and a press briefing by President Christine Lagarde. Meanwhile, the US will report last week’s initial unemployment claims and a speech from a Federal Reserve official.
EUR/USD Daily Market Movers: EURO boosts ECB’s monetary policy
- The EUR/USD’s upward trend continues, influenced by economic data from both the US and the eurozone over the past week.
- May’s ADP report showed a mere increase of 37,000 jobs, missing forecasts, following a downward revision of the previous month’s figures.
- The ISM Services PMI in the US indicated service sector contraction, dropping from 51.6 to 49.9, underperforming against May’s 52.0.
- The EU HCOB Services PMI improved slightly from 48.9 to 49.7 in May, which surpassed expectations. The combined PMI also rose from 49.5 to 50.2, suggesting an uptick in overall business activity.
- Market participants have already incorporated predictions of a 25 basis point reduction by the ECB in future policy meetings.
Euro Technology Outlook: Euro/USD dips below 1.1400, bears eye 1.1300
The EUR/USD shows an upward bias, yet it hasn’t surpassed the weekly high of 1.1454 set on June 3, indicating a possible pullback before resuming its uptrend. Currently, the pair seems to be approaching a lower low. It looks like 1.14 might test the 1.13 level, which is concerning.
If EUR/USD clears the 1.1454 mark, the next target for resistance appears to be 1.1500. Gains beyond this could lead up to the 1.1572 level, marking the peak from April, and possibly reaching 1.16.
However, if the EUR/USD falls below the daily low of 1.1344 from June 2, it could drop to 1.13. A breach below this level may trigger moves towards the 20-day Simple Moving Average (SMA) at 1.1284, then to the 50-day SMA at 1.1218, and ultimately 1.1200.
Economic indicators
ISM Services PMI
The ISM’s monthly service purchase manager index (PMI) gauges key metrics of business activity in the US services sector, a substantial part of the economy. It’s calculated through surveys of supply executives, reflecting changes compared to the previous month. Readings above 50 indicate expansion, while those below suggest contraction, impacting perceptions of the US dollar.
