Daily Price Outlook
During Friday’s European session, the EUR/USD currency pair slipped to the 1.0470 level, facing renewed selling pressure after the release of the latest Eurozone PMI data.
The Hamburg Commercial Bank's (HCOB) preliminary Purchasing Managers Index (PMI) report for February indicated that overall business activity in the Eurozone expanded at a slower-than-expected pace, weighing on the Euro.
In the meantime, the Composite PMI stood at 50.2, slightly below the anticipated 50.5 reading. While the services sector showed growth, its expansion pace was weaker than the previous release.
Meanwhile, the manufacturing sector continued to struggle, though the rate of contraction slowed. HCOB’s Chief Economist, Dr. Cyrus de la Rubia, commented that economic output in the Eurozone remains stagnant, with sluggish manufacturing only marginally compensated by weak services growth.
Furthermore, the political uncertainties in France and concerns over US trade policies added to the Euro’s woes.
Apart from this, the European Central Bank (ECB) is unlikely to find comfort in the PMI data, as steady growth alone is insufficient to ease concerns about the region’s economic trajectory. Market participants have fully priced in three rate cuts from the ECB this year, following the central bank’s recent 25 basis point reduction in the Deposit Facility rate to 2.75%.
US Dollar Strength and Market Movers Impacting EUR/USD
On the other hand, the EUR/USD pair is also under pressure as the US Dollar (USD) regains momentum. The US Dollar Index (DXY) climbed from 106.30 to 106.65, erasing some of its earlier losses.
However, the losses in US dollar was driven by improved market sentiment as investors reassessed former US President Donald Trump’s trade policies.
While Trump had previously imposed tariffs on steel, aluminum, and Chinese imports, market participants believe his tariff strategy may not be as aggressive as initially feared.
Moreover, European Union trade chief Maros Sefcovic revealed that the US has shown some openness to negotiating tariff reductions. These developments have offered temporary relief to global trade partners, reducing the potential for economic disruptions.
Meanwhile, growing hopes for a Russia-Ukraine truce have also pressured the US Dollar, as Trump has signaled a willingness to engage in further negotiations to end the war, with potential sanctions relief for Russia in return.
On the monetary policy front, the Federal Reserve (Fed) remains cautious about inflation risks, particularly in light of Trump’s economic policies. Fed officials continue to maintain a restrictive stance, reinforcing the USD’s resilience.
Investors now await the release of the US S&P Global PMI data for February, due at 14:45 GMT, which could provide further direction for the EUR/USD pair.
EUR/USD – Technical Analysis
EUR/USD is currently trading at $1.04959, showing minimal movement but maintaining a slightly bearish stance. The pair is hovering just above the key pivot point at $1.04663, which is a crucial support level to watch.
As long as prices stay above this pivot, a bullish reversal is possible, with immediate resistance at $1.05205.
A break above this resistance could propel the pair towards the next targets at $1.05563 and $1.05920, indicating potential upward momentum.
On the downside, if EUR/USD drops below the pivot point at $1.04663, bearish sentiment is likely to strengthen.
The first support to watch is at $1.04003, followed by $1.03565 and $1.03162, marking key retracement zones.
These levels could attract buying interest, but a break below them would confirm a bearish continuation.
The 50-Day Exponential Moving Average (EMA) at $1.04305 is currently acting as dynamic support, reinforcing the potential for a bullish rebound. However, if the price falls below the 50 EMA, it could signal further downside risk.
The technical outlook suggests a strategic entry point to buy above $1.04663, targeting a take profit at $1.05434 and setting a stop loss at $1.04149 to manage risk effectively.
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