EUR/USD Forecast: Buyers aim to push it beyond 1.0900

EUR/USD Current price: 1.0850

• The EU Hamburg Commercial Bank flash PMIs indicated contraction decelerated but remains.
• Stock markets surged amid solid earning reports boosting the tech sector.
• EUR/USD retains its near-term positive momentum after peaking at 1.0888.

The EUR/USD pair jumped to 1.0888 on Thursday as the US Dollar turned south following a solid performance in Asian equities, indicating an improved market mood. Stock markets rallied after NVIDIA unveiled its earning report, with higher-than-anticipated sales estimates, boosting the tech sector and risk appetite.

EUR/USD rally cooled down following the release of tepid European data. The Hamburg Commercial Bank (HCOB) released the February flash Producer Manager Indexes (PMIs), indicating a deceleration in the rate of contraction across the bloc's business activity. The Eurozone witnessed the slowest pace of decline in eight months, with the provisional PMI survey data revealing stabilization in the services sector, which helped somewhat to counterbalance the continued sharp downturn in manufacturing output.

The HCOB Flash Eurozone Composite PMI rose modestly from 47.9 in January to 48.9. Despite signaling a ninth consecutive month of contracting output, the latest reading points to a moderation in the extent of the economic downturn, excluding the initial months of the pandemic, since 2013. The manufacturing index contracted to 46.1 from the previous 46.6, while the Services PMI surged to 50 after printing at 48.4 in January.

However, the German HCOB Flash PMI data indicated a persistent contraction in business activity. February's report suggests that the downturn is intensifying as the Composite PMI held within contraction levels for the eighth consecutive month, falling to 46.1 from 47.0 in January. The manufacturing sector, in particular, experienced a sharp and accelerated reduction in output, with the index plummeting from 45.5 to a stark 42.3. The contraction in the service sector was milder, as the Services PMI improved to 48.2 from 47.7, still below the critical 50 mark that indicates expansion.

EU figures pushed EUR/USD towards the 1.0840 price zone, where buyers took their chances ahead of Wall Street's opening, as optimism prevails. The upcoming American session will see the United States (US) releasing the usual weekly unemployment figures and Existing Home Sales, while S&P Global will publish the February Flash PMIs.

EUR/USD short-term technical outlook

The EUR/USD pair trades a handful of pips below the 38.2% Fibonacci retracement of the 1.1139-1.0694 daily slump at 1.0865 and seems poised to extend gains beyond the intraday high. In the daily chart, technical indicators suggest a robust upward momentum after crossing their midlines into positive territory while maintaining firmly bullish slopes. At the same time, EUR/USD is currently developing above all its moving averages, with the 100 Simple Moving Average (SMA) crossing above a flat 20 SMA. The latter converges with the 23.6% retracement of the aforementioned slide at 1.0799.

As of the 4-hour chart, the EURUSD pair also exhibits a strong bullish momentum, although technical indicators have pared their rallies around overbought readings. Meanwhile, the 100 SMA is flat at 1.0780, while the 200 SMA also lacks directional strength at around 1.0840. Finally, the 20 SMA extends its advance above the 100 SMA, reinforcing the near-term bullish sentiment. The pair has room to extend gains towards the next Fibonacci level, the 50% retracement at 1.0915, should the intraday high be surpassed.

Support levels: 1.0800 1.0765 1.0720

Resistance levels: 1.0880 1.0915 1.0950

(This story was corrected on February 22 at 14:22 GMT to say that Germany's Manufacturing PMI stood at 45.5 in January, not 46.1)

Sections of this story have been written with the help of an Artificial Intelligence tool and validated by an editor.