Home Forex Market Analysis EUR/USD: Bears Still in Control Despite Two-Day Jump

EUR/USD: Bears Still in Control Despite Two-Day Jump

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EUR/USD: Bears Still in Control Despite Two-Day Jump

The EUR/USD pair jumped on the first day of the month as investors reacted to the relatively strong European manufacturing data and the weak US initial jobless claims numbers. The pair rose to 1.1756, which was relatively higher than the year-to-date high of 1.1700.

Strong manufacturing recovery

The manufacturing industry plays an important role in some European countries like Germany, where companies like BMW and Daimler employ millions of people. The sector also helps to support the bigger services sector.

While the European economy has suffered a slow rollout of the vaccine, the manufacturing sector bounced back in March. According to Markit, the Eurozone manufacturing PMI soared to a multi-year high of 62.5 in March from the previous month’s 57.9. This growth happened as companies were dealing with more orders from Europe and other external countries like those in Asia and North America.

According to Markit, the manufacturing sector was led by Germany, the biggest economy in Europe. The country’s PMI rose from 60.7 to a record 66.6, while in France, the PMI rose to 59.3. In Italy and Spain, the PMI rose to 59.8 and 56.9, respectively. A PMI figure of 50 and above is a sign that an industry is seeing some expansion.

These numbers came at an important time for the EU economy. Some member states like Germany and France have restarted some of their lockdowns in a bid to curtail the pandemic. Also, the bloc has struggled in its vaccination process. However, there are signs that the countries are ramping up the vaccinations, which could help offset the delay. 

On Wednesday, the EUR/USD reacted to the latest EU inflation numbers. According to Eurostat, the core consumer price index (CPI) dropped from 1.1% in February to 0.9% in March. In the same period, the headline CPI rose from 0.9% to 1.3%. The figure is still below the European Central Bank (ECB) target of 2.0%.

US infrastructure and initial jobless claims

The EUR/USD also reacted to the latest US initial jobless claims numbers. According to the Bureau of Labour Statistics (BLS), the number of Americans filing for initial jobless claims rose from 658,000 to 719,000 last week. This was a worse figure than the median estimate of 680k. In the same period, the continuing jobless claims declined from 3.84 million to 3.79 million. Analysts were expecting the claims to fall to 3.7 million.

Further, according to Markit, the US manufacturing PMI increased from 58.6 in February to 59.1 in March. Another figure by the Institute of Supply Management showed that the PMI increased from 60.8 to 64.7. 

The data came a day after Joe Biden unveiled his giant $2.3 trillion infrastructure package. If passed, the bill will bring the total funding by the US government to more than $5 trillion. This is after the government passed a $900 billion and a $1.9 trillion stimulus package in the first quarter.

EUR/USD forecast

The two-hour chart shows that the EUR/USD pair has bounced back from the year-to-date low of 1.1700 to 1.1762. The price is slightly below the important resistance level at 1.1853, which was the lowest level on March 9. It has also moved above the 25-day and 15-day exponential moving averages (EMA). The pair may still continue falling as bears target the next key support level at 1.1600, which is slightly below the 38.2% retracement on the daily chart.

EUR/USD forecast

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