- US Dollar resurfaces as optimism fades in Wall Street.
- Eurozone PMIs on Friday could be critical for ECB hawkish expectations.
- EUR/USD ends five-day positive streak, retreating a hundred pips from the recent top.
The EUR/USD ended a five-day positive streak on Thursday on the back of a US Dollar recovery. A deterioration in market sentiment late in Wall Street amid banking jitters boosted Treasury bonds and the US Dollar. The pair, which hit its highest since February at 1.0933 early in Europe, dropped below 1.0830 in New York, giving up most gains that followed the FOMC meeting.
Hawkish comments from European Central Bank (ECB) officials kept making headlines on Thursday, offering support to the Euro during most of the day. But on American hours, the common currency lost momentum on banking jitters.
Data from the US on Thursday showed the Chicago Fed National Activity Index dropped to -0.19 from 0.23 while Initial Jobless Claims fell to 191,000, the lowest in three weeks, showing a tight labor market.
The releases of the preliminary PMIs in the Eurozone (EZ) and the US are due on Friday. Those numbers could be important for markets, considering it would be the first glance at how the global economy is performing in March. Positive figures from the EZ should keep the ECB on its way to more rate hikes. But, all the numbers could be offset by market turmoil if confidence continues to deteriorate.
EUR/USD short-term technical outlook
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The EUR/USD ended not only a positive streak on Thursday, but also offered signs that it has peaked above 1.0900, at least in the short term. The ongoing correction could find an initial support level around 1.0800, followed by 1.0760, which should limit the downside. Below, the 20-day Simple Moving Average (SMA) awaits at 1.0650.
The 4-hour chart shows technical indicators favoring the downside or a consolidation far from the recent top, with the RSI moving down just under 70. A consolidative phase could take place between 1.0865 (intraday resistance) and the 20 SMA at 1.0800.
View Live Chart for the EUR/USD
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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