A series of Purchasing Managers’ Index (PMI) data points was released in Europe on Tuesday, including manufacturing and services PMIs for Germany, France, and the Euro area as a whole. All of these data points showed continued economic expansion, and, with the exception of French manufacturing, showed better-than-expected improvement in economic sentiment.

Meanwhile, the US dollar staged an extended rebound on Tuesday, as speculation continued to brew over a possible rate hike by the Federal Reserve at its next meeting in mid-March. Fed officials, including Chair Janet Yellen, have publicly pushed for raising interest rates sooner rather than later.

Despite the better-than-expected Eurozone data on Tuesday, EUR/USD continued to be pressured on a stronger US dollar as well as fears surrounding the upcoming French presidential election, which will be held two months from now. Concerns have surfaced that anti-EU nationalist candidate Marine Le Pen could be narrowing the gap with the centrist front-runner, Emmanuel Macron. An upset victory by Le Pen could put at risk the future of both the European Union and the euro shared currency.

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Overall, EUR/USD continues to trade within a strong bearish trend, both on a long-term and shorter-term basis. The month of January saw a sharp upside pullback for the currency pair, but that rally broke down in early February, leading to the current downturn in the direction of the larger bearish trend.

Currently, EUR/USD has closely approached major support to the downside around the key 1.0500 level. With continued dollar support ahead of March’s Fed decision, and euro pressure ahead of a hotly-contested French election, EUR/USD is likely to remain pressured overall in the medium-term. A breakdown below 1.0500 support should open the way for further downside momentum towards the 1.0350-area support lows hit in late December and early January. Any further breakdown below that area would confirm a continuation of the longer-term downtrend, with a strong psychological target at parity (1.0000).

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DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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