EUR/USD hits key resistance after mixed EU PMI and CPI data

EUR/USD hits key resistance after mixed EU PMI and CPI data
Written by:
Crispus Nyaga
December 1, 2020
  • The EUR/USD found strong resistance after the strong manufacturing PMI data from Europe.
  • In the Eurozone, the manufacturing PMI rose from 53.6 to 53.8.
  • However, inflation remained subdued at -0.3% in November.

The EUR/USD is rising today as traders react to the relatively strong economic data from Europe. The pair is trading at 1.1970, which is a few pips below the April 2018 high of 1.2000.

EUR/USD at an important resistance

Eurozone manufacturing activity did well in November

European manufacturers did well in November even as the bloc continued to experience its most serious wave of the Covid-19 virus.

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According to Markit, the bloc’s overall manufacturing PMI increased from 53.6 in October to 53.8 in November. That increase was better than the flash PMI of 53.6.

Most countries in Europe recorded strong manufacturing activity. Germany, the biggest manufacturer in the region, saw its PMI drop to a two-month low of 57.8. Still, that was a strong reading considering that a PMI reading of 50 and above is a sign of expansion.

Netherlands, Ireland, Austria and Italy recorded a strong PMI while activity in France and Spain fell to a 5-month and 6-month low, respectively. The report said:

“Germany was once again the main engine behind the region’s expansion, enjoying a rate of output and order book growth that has been rarely exceeded over the survey’s 25-year history.”

Eurozone inflation subdued

The EUR/USD is also reacting to the subdued consumer inflation data from the European Union. In a report, Eurostat said that annual inflation in the region remained stable at -0.3% down from 0.7% in the same month last year. The CPI also dropped by 0.3% on a month-on-month basis.

The core CPI, which is an important data that excludes the volatile food and energy products, declined by 0.3% in November after rising by 0.2% in October. The CPI increased by 0.2% on a year-on-year basis.

The worst-affected countries were in Greece, Estonia and Ireland while the best performers were Poland and Hungary.

Further data from Europe showed that the German unemployment rate improved to 6.1% in November from 6.2%. That happened as the number of unemployed people fell by 39,000.

EUR/USD technical outlook

EUR/USD technical chart

On the daily chart, we see that the EUR/USD price has been in a steady rise after double-bottoming at 1.1598 on November, 4. Today, the price is a few pips below the September high of 1.2000. It is also slightly higher than the 25-day and 15-day exponential moving averages while the Relative Strength Index has continued to rise. Therefore, there are two potential scenarios you can try from a forex demo account.

First, the pair could break-out above 1.2000 and continue rising. Second, by forming a double-top, it could incentivise shorts to return, which will then push the pair lower.