• The EUR/USD outlook turned slightly bearish on Thursday after Eurozone PMI data.
• Business activity in the Eurozone crossed below 50 in May.
• The dollar remained fragile as market participants watched the progress of Trump’s tax bill.

The EUR/USD outlook turned slightly bearish on Thursday after data revealed a contraction in Eurozone business activity in May. However, the euro remained near peaks hit in the previous session as the greenback fell on US fiscal worries. 

Data on Thursday revealed that business activity in the Eurozone crossed below 50 in May, indicating a contraction. The Composite PMI fell from a previous reading of 50.4 to 49.5. The decline came mostly from the services sector. Meanwhile, manufacturing remained stable.

The soft data might increase pressure on the European Central Bank to lower interest rates at the next meeting. However, policymakers will keep watching incoming data for further clues on the extent of damage Trump’s tariffs have had on the economy. 

Meanwhile, the dollar remained fragile as market participants watched the progress of Trump’s tax bill. The US currency has had a difficult week after Moody’s downgraded the US government’s credit rating due to a growing debt. The move weakened investor confidence in US assets.

On Wednesday, the US reported a poor Treasury bonds auction, confirming the drop in demand. Trump’s bill is slowly making its way to the Senate. If it is passed, it will increase the US debt burden, further hurting investor confidence.
 

EUR/USD key events today

• Unemployment Claims
• Flash Manufacturing PMI
• Flash Services PMI
   

EUR/USD technical outlook: Price pauses after new high

(Click on image to enlarge)

EUR/USD 4-hour chart

On the technical side, the EUR/USD price has paused its rally after breaking above the 1.1301 key resistance level. Still, it trades well above the SMA with the RSI above 50, supporting a bullish bias. 

Previously, the price was trading in a downtrend until it got to the 1.1100 key support level. Here, bulls emerged strong enough to push the price above the 30-SMA. After that, they confirmed a bullish reversal by making a higher low and a higher high. 

However, the rally has slowed down and price action is showing indecision. Most candlesticks have small bodies with wicks. This is a sign that neither bears nor bulls are ready to commit to a strong move. However, given the bullish bias, the price might soon surge to reach the next resistance at 1.1500.

More By This Author: