- The Euro struggled near the 1.0770 resistance against the US Dollar, and moved down.
- The EURUSD pair is likely forming a head and shoulders pattern at 1.0770, and may soon decline further.
- Today, the Euro Zone Manufacturing Purchasing Managers Index (PMI) for April 2017 (Preliminary) released by the Markit Economics posted a rise from 56.2 to 56.8.
EURUSD Technical Analysis
The Euro had a good run yesterday towards 1.0775 against the US dollar where it faced resistance. The EURUSD pair is currently moving lower and trading above the 1.0700 support.
One important point is to note that the pair is likely forming a head and shoulders pattern at 1.0770 on the hourly chart.
EURUSD Hourly Chart
It has already moved below the 1.0735 support and the 23.6% Fib retracement level of the last wave from the 1.0640 low to 1.0776 high, which is a bearish sign.
It also cleared a bullish trend line with support at 1.0740. However, the pair is just holding the neckline support at 1.0700.
As long as the pair is above the 1.0700 support, it may bounce back. On the other hand, a break and close below 1.0700 may call for validation of the head and shoulders pattern at 1.0770 for more declines.
The hourly RSI is just below 50, and struggling to move higher
Fundamentals – Euro Zone Manufacturing PMI
Today in the Euro Zone, the Euro Zone Manufacturing Purchasing Managers Index reading (PMI) for April 2017 (Preliminary) was released by the Markit Economics. The forecast was slated for a rise from the previous reading of 56.2 to 56.3.
However, the actual increase was more, as the Euro Zone Manufacturing Purchasing Managers Index jumped to 56.8. The Euro Zone Services PMI for April 2017 (Preliminary) was also impressive, as there was a rise to 56.2 from 56.0, whereas the market was not expecting any increase.
Commenting on the Manufacturing Purchasing Managers Index, the Chief Business Economist at IHS MArkit, Chris Williamson, stated:
The eurozone economy has enjoyed a strong start to the second quarter. The April flash PMI is running at a level consistent with 0.7% GDP growth, up from 0.6% in the first quarter.
Overall, results were positive, but it may not be easy for the EURUSD pair to hold the 1.0700 support. If it does hold, it may avert the head and shoulders pattern for a move back towards 1.0775.