Forex world

March 24, 2023

EUR/USD comes under heavy pressure and breaches 1.0800

- EUR/USD adds to Thursday’s losses below the 1.0800 mark.

- Flash Manufacturing PMIs in Germany and EMU disappoint in March.

- US Durable Goods Orders, advanced PMIs next on tap across the pond.

Further selling pressure now drags EUR/USD back below the 1.0800 yardstick, or 2-day lows, at the end of the week.

EUR/USD weaker post-PMIs

EUR/USD extends the pessimism in the second half of the week and retreats from recent monthly peaks north of 1.0900 the figure on the back of the moderate pick-up in the demand for the greenback, while the mixed prints from preliminary PMIs in the euro bloc also collaborate with the corrective daily decline.

On the latter, while the Services sector in the euro area remains healthy, the Manufacturing sector still struggles to find a firmer foot after preliminary readings showed the Manufacturing PMI in Germany and the broader Euroland are expected to have eased to 44.4 (from 46.3) and 47.1 (from 48.5), respectively, during March.

Later in the US data space, Durable Goods Orders for the month of February are due seconded by flash PMIs and the speech by St. Louis Fed J.Bullard.

What to look for around EUR

EUR/USD gathers further downside traction and breaks below the 1.0800 mark on the back of some profit taking mood, the dollar’s recovery and disheartening results from the domestic calendar.

In the meantime, price action around the European currency should continue to closely follow dollar dynamics, as well as the potential next moves from the ECB in a context still dominated by elevated inflation, although amidst dwindling recession risks for the time being.

Key events in the euro area this week: European Council Meeting, EMU, Germany Flash PMIs (Friday).

Eminent issues on the back boiler: Continuation, or not, of the ECB hiking cycle. Impact of the Russia-Ukraine war on the growth prospects and inflation outlook in the region. Risks of inflation becoming entrenched.

EUR/USD levels to watch

So far, the pair is retreating 0.53% at 1.0769 and faces immediate support at 1.0732 (55-day SMA) followed by 1.0614 (100-day SMA) and finally 1.0516 (monthly low March 15). On the upside, a break above 1.0929 (monthly high March 23) would target 1.1032 (2023 high February 2) en route to 1.1100 (round level).

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