Market participants are closely monitoring upcoming US economic data releases, including Unemployment Claims and Flash Manufacturing PMI, for further market direction.
Key Points
- Today, EUR/USD rose by 0.20% to 1.0844.
- HCOB Flash Manufacturing PMI rose to 47.4, above expectations.
- ECB is expected to reduce interest rates next month.
EUR/USD Daily Price Analysis – 23/05/2024
Yesterday, the EUR/USD pair declined 0.29%. This drop was primarily influenced by the release of the FOMC minutes. The minutes revealed that Federal Reserve officials were more concerned about inflation than previously anticipated and lacked confidence in moving forward with interest rate reductions. Policymakers highlighted persistent inflation, with several members indicating a willingness to tighten policy further if necessary. This hawkish stance strengthened the U.S. dollar, exerting downward pressure on the euro.
In addition, the Eurozone reported weaker-than-expected ZEW Economic Sentiment data, which highlighted growing concerns over the region’s economic outlook. These factors combined to push the EUR/USD pair lower throughout the day.
The euro rose significantly against the US dollar during early European trade on Thursday, driven by stronger-than-expected economic data from the Eurozone. The HCOB Composite PMI for May exceeded expectations, reflecting a quickening recovery in the European manufacturing sector.
Economic Data Highlights
The recent economic data released for May shows a promising uptick in Eurozone activity, particularly within the manufacturing sector. These improvements are vital indicators, providing a snapshot of the region’s economic health and potential future trends. Here’s a closer look at the key highlights:
HCOB Composite PMI:
- Increased to 52.3 in May from 51.7 in April.
- Exceeded the expected reading of 52.0.
HCOB Flash Manufacturing PMI:
- Rose to 47.4 in May from 45.7 in April.
- Surpassed the consensus forecast of 46.2.
HCOB Flash Services PMI:
- Remained unchanged at 53.3 in May.
- Slightly below the expected reading of 53.5.
The improvement in the manufacturing sector primarily drove the uptick in the Composite PMI. This sector saw its Flash Manufacturing PMI rise significantly, indicating a rebound from previous lows. However, the Services PMI did not meet expectations, remaining flat from the previous month.
Inflation and ECB Outlook
The May data for the European Central Bank (ECB) were mixed. Although inflation rates for input costs and output prices eased, they remained elevated compared to pre-pandemic levels. The pace of output price inflation was the weakest since November 2023, as a weaker reduction in manufacturing selling prices partially offset a slower increase in services charges.
ECB policymakers are widely expected to reduce interest rates in their next meeting. This expectation is fueled by the recent economic data, suggesting that the ECB might take a more accommodative stance to support the ongoing recovery.
Key Economic Data and News to Be Released Today
Later today, traders will closely watch the release of US Unemployment Claims data and Flash Manufacturing PMI data. Analysts forecast unemployment claims to come in at 220,000, slightly lower than the previous 222,000. The Flash Manufacturing PMI is expected to remain unchanged at 50.0.
EUR/USD Technical Analysis – 23/05/2024
The intraday direction of the EUR/USD is currently bearish as the price struggles to break above the indicator, indicating a current price resistance. The price is encountering resistance at the EMA level of 1.08434, holding back upward movement.
The price has recently tested the resistance at 1.08450 but failed to sustain above it, leading to a retracement. The RSI is currently at 59.73, indicating a neutral to slightly bullish momentum, though not strong enough to push past the resistance levels.
So, the EUR/USD pair is currently facing significant resistance, and unless it can break above the EMA and R1 levels, the intraday outlook remains bearish. Traders should monitor the RSI for any changes in momentum and keep an eye on the support and resistance levels for potential breakout or breakdown scenarios.
EUR/USD Fibonacci Key Price Levels 23/05/2024
Short-term traders planning to invest in EUR/USD today should keep a close eye on the following key price levels for the day:
| Support | Resistance |
| 1.0817 | 1.0852 |
| 1.0806 | 1.0863 |
| 1.0788 | 1.0881 |
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
