EUR/USD Forecast: Recovery Stalled Around 1.1350, Still Bullish

Key Points:

• Markit reported better-than-anticipated PMIs in June, reviving hopes of an economic recovery.
• Equities rallied after the US government reaffirmed its trade deal with China.
• EUR/USD bullish after extending its recovery above the 23.6% retracement of its latest daily run.

The greenback edged lower against all of its major rivals this Tuesday, resulting in EUR/USD hitting a weekly high of 1.1348. The dollar’s slump was correlated to the positive momentum in global equities after the US government reaffirmed the US-China trade deal remains firmly in place. Also, better-than-anticipated preliminary estimates of June Markit PMIs underpinned the mood. The preliminary estimate of the EU Manufacturing PMI came in at 46.9 sharply up from the previous 39.4 and above the expected 44.5. The Services PMI printed at 47.3 against 30.5 in May. In the US, the manufacturing index surged from 39.8 to 49.6, while the services PMI recovered from 37.5 to 46.7.

The pair retreated from the mentioned high as Wall Street also pared gains and eased from its daily tops, although held into the green by the end of the day. This Wednesday, the macroeconomic calendar will be quite light, as Germany will release its IFO Survey on Business Climate for June, seen recovering from 79.5 in May to 85. The US will publish MBA Mortgage Applications and the April Housing Price Index.

EUR/USD Short-Term Technical Outlook

The EUR/USD pair is trading above the 1.1300 mark as the day comes to an end, also above the 23.6% retracement of its latest daily advance at 1.1270. Earlier this week, the pair bottomed at the 38.2% retracement of the same rally, indicating that the pair may well retest it’s monthly high at 1.1422. In the 4-hour chart, the price is developing above all of its moving averages, while technical indicators have reached overbought readings before paring its advance, all of which keeps the risk skewed to the upside. The immediate resistance is the 1.1350 price zone, where the pair topped last week.

Support levels: 1.1270 1.1225 1.1170
Resistance levels: 1.1350 1.1390 1.1425