EUR/USD Rallies Above 1.1100, More Gains Possible
- EUR/USD gained traction and rallied above the 1.1100 resistance zone.
- A key bullish trend line is forming with support at 1.1010 on the 4-hours chart.
- The Euro Zone CPI in May 2020 (Prelim) increased 0.1% (YoY), down from the last 0.3%.
- The Euro Zone Manufacturing PMI could remain well below 50.0 at 39.5 in May 2020.
EUR/USD Technical Analysis
In the past few days, the Euro gained bullish momentum above the 1.0950 support against the US Dollar. As a result, EUR/USD broke the 1.1000 resistance to move into a positive zone.
Looking at the 4-hours chart, the pair settled nicely above the 1.1000 zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).
It opened the doors for more gains and the pair rallied above the 1.1100 resistance. It traded to a new multi-week high at 1.1145 and recently corrected a few points.
On the downside, there are many supports forming near the 1.1050 and 1.1020 levels. The 50% Fib retracement level of the recent rally from the 1.0933 low to 1.1145 low is also near 1.1040.
Moreover, there is a key bullish trend line forming with support at 1.1010. If the pair fails to stay above the trend line support, it could decline towards the 1.0900 zone or the 100 simple moving average (red, 4-hours).
On the upside, an initial resistance is near the 1.1150 level. A clear break above 1.1150 might lead the pair towards the 1.1200 resistance zone in the coming sessions.
Fundamentally, the Euro Zone CPI report for May 2020 (prelim) was released by the Eurostat. The market was looking for a 0.2% increase in the CPI compared with the same month a year ago.
The result was disappointing as the Euro Zone CPI increased only 0.1% (YoY). Looking at the Core CPI, there was a 0.9% rise, more than the 0.8% forecast.
The report added:
Looking at the main components of euro area inflation, food, alcohol& tobacco is expected to have the highest annual rate in May (3.3%, compared with 3.6% in April), followed by services (1.3%, compared with 1.2% in April), non-energy industrial goods (0.2%, compared with 0.3% in April) and energy (-12.0%, compared with -9.7% in April).
Overall, EUR/USD might correct in the short term, but it might find support near 1.1040 or 1.1020. GBP/USD is also showing positive signs and it could rise further if it clears the 1.2400 resistance.
Upcoming Economic Releases
- Germany’s Manufacturing PMI for May 2020 - Forecast 36.8, versus 36.8 previous.
- Euro Zone Manufacturing PMI May 2020 – Forecast 39.5, versus 39.5 previous.
- UK Manufacturing PMI for May 2020 – Forecast 40.7, versus 40.6 previous.
- US Manufacturing PMI for May 2020 – Forecast 39.8, versus 39.8 previous.
- US ISM Manufacturing Index for May 2020 – Forecast 42.5, versus 41.5 previous.