EURUSD Staging Rebound While Under Pressure

Andreas Thalassinos
Andreas Thalassinos

03.4.2024

Positive results in the manufacturing industry after sixteen months of consecutive contraction in the US and less-than-forecasted consumer prices in Germany pulled the US Dollar Index higher and pushed the eurozone single currency lower.

Overview

Positive results in the manufacturing industry after sixteen months of consecutive contraction in the US and less-than-forecasted consumer prices in Germany pulled the US Dollar Index higher and pushed the eurozone single currency lower. Traders will be closely monitoring the currency pair due to the release of significant economic data later today that could impact currency valuations. 

Upcoming Economic Events

Wednesday, 12:15 pm (GMT+0): ISM Services PMI (USD)

Wednesday, 02:00 pm (GMT+0): Unemployment Claims (USD)

Thursday, 06:30 am (GMT+0): CPI m/m (CHF)

Thursday, 12:30 pm (GMT+0): Unemployment Claims (USD)

Friday, 12:30 pm (GMT+0): Employment Change (CAD)

Friday, 12:30 pm (GMT+0): Unemployment Rate (CAD)

Friday, 12:30 pm (GMT+0): Average Hourly Earnings m/m (USD)

Friday, 12:30 pm (GMT+0): Non-Farm Employment Change (USD)

Friday, 12:30 pm (GMT+0): Unemployment Rate (USD)

Fundamentals

In March, the US ISM Manufacturing Index showed a strengthening trend with a value of 50.3 after contracting for 16 consecutive months, surpassing the previous month's 47.8 reading. This value stood above the expected consensus forecasts of 48.5, indicating an improvement in the manufacturing sector. The current reading marks the highest value recorded since October 2022, highlighting a positive trend in the manufacturing industry.

The US ISM Manufacturing Index is one of the most reliable economic indicators available. It provides guidance to supply management professionals, economists, analysts, and government and business leaders. A reading above 50.0 indicates industry expansion, while below indicates contraction.

According to the latest report by the Federal Statistical Office (Destatis), the inflation rate in Europe's largest economy is expected to stand at +2.2% in March 2024, the lowest since April 2021 (+2.0%). The inflation rate is typically calculated by tracking the percentage change in the consumer price index (CPI) over a given period, usually a year. Furthermore, an increase of 0.4% in consumer prices is anticipated for February 2024.

Technical Analysis

Since February 14, the EURUSD currency pair followed an upward path only to reach the exchange rate 1.09811. The short-lived uptrend has eventually been proven to be an a-b-c correction. The bulls were unable to maintain the upward trajectory for the EURUSD, which was evident in the formation of a lower peak at 1.09426. Subsequently, a breach of the trough at 1.08347 completed the formation of a Head and Shoulders bearish reversal pattern, which ended the bulls' appetite. Specifically, the breach of the neckline at 1.08347 signaled the end of the uptrend and the very early beginning of a new trend in the opposite direction. As a result, the exchange rate declined to the 161.8% Fibonacci extension and beyond.

The 50-period Moving Average and the Momentum Oscillator both indicate a bearish outlook. Prices are currently trading below the Moving Average line, and the Momentum Oscillator is recording values below the 100 baseline. On the other hand, the Stochastic oscillator emerged from the oversold area, implying a possible rebound.

Downside Potential Targets

1.07012: The first potential target is 1.07012, representing the 261.8% Fibonacci extension drawn from the swing low, 1.08017, to the swing high at 1.08643.

1.06551: The price target 1.06551 aligns with the S3 weekly Pivot Point.

1.06002: The third price objective is calculated at 1.06002, corresponding to the 423.6% Fibonacci extension drawn from the trough 1.08017 to the peak at 1.08643.

1.05018: The final target is seen at 1.05018, which represents the 424.6% Fibonacci extension of the failure swing traced by the trough at 1.08347 and the peak at 1.09426.

Conclusion and Considerations

To sum up, the EURUSD currency pair is facing bearish pressure from the market due to favorable outcomes in the US economy and deteriorating data in Europe. Additionally, the US dollar has experienced four consecutive weeks of rally, which has added to the downward pressure on the currency pair. As a result, investors and traders are advised to exercise caution when making investment decisions and stay informed about economic events and geopolitical changes. 

 

 

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.