EURUSD tapped its 4-week highs at the start of this week’s trading at 1.1073 despite concerns brought about by disappointing Chinese data over the weekend. The currency pair has since pared some of its gains. As of this writing, it is trading at 1.0456.
The rally on EURUSD has mostly been driven by expectations that the Federal Reserve would soon announce a rate cut. Today’s US ISM manufacturing report could either fuel or dampen its recent uptrend. Due at 3:00 pm GMT, the report is eyed at 50.5. A better-than-expected figure could be bullish for the dollar as it would hint at economic resilience in the US. On the other hand, a disappointing figure would only fuel rate cut speculations and push EURUSD higher.
Ahead of its release, the French and German final manufacturing PMIs are due. Scheduled at 8:50 am and 8:55 am, they are seen at 49.7 and 47.8, respectively. Then at 9:00 am GMT, the euro zone manufacturing PMI is expected at 49.1.
EURUSD Outlook
On the daily time frame, we can see that EURUSD has recently broken resistance at the falling trend line (from connecting the highs of December 31, January 16, and February 3). However, the currency pair will need to trade past the 100 SMA in order to extend its gains. A strong close above 1.1050 would set the 200 SMA as the next resistance level at 1.1000. If it does not hold, EURUSD could make its way to its December 30 highs at 1.1235.
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On the other hand, a reversal candle around the 100 SMA could mean that EURUSD will trade lower. By drawing the Fibonacci retracement tool from the low of December 20 to today’s highs, we can see that the currency pair could fall to the area between the 23.6% and 38.2% Fib levels. For one, this price around 1.0970 to 1.0990, coincides with the broken trend line which may provide support.
The hourly time frame also shows that there is a confluence of support at this level. By connecting the lows of February 26 and February 28, we can see that there is trend line support. When you draw the Fibonacci retracement tool from Friday’s low to today’s high, you will also see the the area between the 50% and 61.8% Fib levels coincides at this area. Reversal candles around this price could mean that the rally on EURUSD is still intact. On the other hand, a strong bearish close below 1.0970 could mean that the currency pair could fall to support at 1.0800.
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