• Data hinted at a potential easing of the downturn in the Eurozone economy.

• The Eurozone economy will likely contract again in the fourth quarter.

• Data showed a greater-than-expected drop in Americans filing new jobless claims.

Positive Eurozone PMI data on Friday helped the euro maintain its stability, infusing a sense of optimistic bullishness into the outlook for EUR/USD. On Thursday, data hinted at a potential easing of the downturn in the Eurozone economy.

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However, trading was subdued due to holidays in the US and Japan. Notably, preliminary surveys indicated that the recession in Germany might be less severe than anticipated. Consequently, it overshadowed poor figures for French business activity.

Michael Brown, a strategist at TraderX, commented that while there’s a slight improvement, it only suggests that things are becoming slightly less bad.

Moreover, the survey revealed that the Eurozone economy will likely contract again in the fourth quarter. Saxo Bank strategists noted, “Euro/dollar rose back above $1.09 but may face formidable resistance at $1.096.”

Elsewhere, the markets barely reacted to the surprising victory of anti-EU far-right populist Geert Wilders in Wednesday’s Dutch parliamentary elections.

Meanwhile, the dollar index decreased by 0.14%, the first decline since Monday. This decline followed data showing a greater-than-expected drop in Americans filing new jobless benefit claims last week.

Adding to concerns for the Federal Reserve, a University of Michigan survey on Wednesday indicated that consumers this month anticipate higher inflation in both the near and long term. Consequently, market expectations for Fed rate cuts in 2024 have dropped. Futures now indicate a 27% chance that the Fed will cut its target rate at the March 2024 policy meeting.

EUR/USD key events today

• US S&P Global Services PMI

EUR/USD technical outlook: Trapped between 30-SMA and 1.0900 level.

On the technical side, the EUR/USD pair trades in a tight range between the 30-SMA and the 1.0900 critical level. Bulls and bears are fighting for control at this level. However, a closer look at price action before it got to the 30-SMA shows that bulls were in control.

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This is also clear in the RSI. Although it dipped below 50, it trades above, indicating solid bullish momentum. Therefore, bulls have a higher chance of pushing the price above the SMA to retest the 1.0950 resistance level.

https://www.forexcrunch.com/eur-usd-outlook-euro-holds-ground-after-a-boost-from-pmi/