EUR/USD Finds Support Amid PMI Optimism, Eyes 1.0500-1.0530 Retest
EUR/USD continues to benefit from broad-based dollar weakness and improving eurozone data, with a window of opportunity for the pair to retest the key 1.0500-1.0530 resistance zone. The upcoming eurozone flash PMI figures could provide the next catalyst, particularly given the recent uptick in Germany’s ZEW survey, which has historically correlated with stronger PMI readings. Historical data suggests that when both economic sentiment and current conditions improve, German PMI has risen 9 out of 11 times, supporting the case for a near-term bounce in EUR/USD. Additionally, softer U.S. jobless claims and Philly Fed data have contributed to lower U.S. yields, reinforcing downward pressure on the dollar. The combination of these factors has allowed EUR/USD to rally above its 5-DMA, extending gains towards 1.0495.
Technically, EUR/USD is displaying bullish momentum, with RSI indicators rising and a monthly bull hammer candle in place, signaling further upside potential. Immediate resistance lies at 1.0500-1.0530, a level that has capped recent recoveries. A break above this region could see the pair targeting 1.0600-1.0630, where further selling pressure may emerge. However, downside risks remain as the broader trend still favors a weaker euro over the long term. Initial support is seen at 1.0435, with further downside levels at 1.0419 (recent low on EBS) and 1.0380. If the pair fails to hold above these levels, bearish momentum could resume, reinforcing the long-term downtrend.
Looking ahead, Friday’s eurozone and U.S. PMIs will be critical in determining near-term direction. A strong eurozone PMI print could support hawkish ECB rhetoric and delay the expected rate-cut cycle, lifting EUR/USD further. However, if U.S. economic data outperforms, dollar strength could return, capping any gains. Additionally, geopolitical concerns, including trade tariffs, could weigh on the euro in the longer term. For now, the short-term bias remains skewed to the upside, with a break above 1.0500-1.0530 needed to confirm further bullish momentum.