EUR/USD bounces back as Eurozone business output holds steady

The EUR/USD price popped as the overall fear of the new Delta variant eased. The pair also rose after the relatively weak Eurozone flash manufacturing and services PMI data. It rose to 1.1725, which was slightly above last week’s low of 1.1665.

EU PMI numbers

The Eurozone continued experiencing an increase in the number of Covid-19 cases in August. As a result, the rising cases had an impact on the bloc’s output. According to Markit, the manufacturing PMI declined from 62.8 in July to 61.5 in August. This decline was lower than the median estimate of 62.0.

In the same period, the services PMI declined from 59.8 to 59.7 while the composite PMI declined from 60.2 to 59.5. These three numbers were relatively worse than what analysts were expecting. Still, with the PMI remaining above 50, it is a sign that the bloc’s business activity is still strong.

Germany was among the best-performing countries in the region. Its manufacturing PMI eased from a 23-year high of 65.9 to 62.7. The services PMI declined slightly to 61.5. In a statement, Chris Williamson of Markit said:

“Although the spread of the Delta variant caused widespread problems across the region, curbing demand and causing further supply issues, firms benefited from virus containment measures easing to the lowest since the pandemic began.”

The EUR/USD will next react to the flash manufacturing, services, and composite PMI numbers from the United States. The numbers are expected to show that business activity moderated slightly in August as the country continued facing significant challenges.

The pair will also react to the latest US existing home sales numbers. The data is expected to show that the existing home sales numbers declined from 5.86 million to 5.81 million. Still, the country’s housing market remains strong.

EUR/USD forecast

The EUR/USD pair has been in a strong bullish trend on Monday. The pair moved from last week’s low of 1.1662 to today’s high of 1.1730. The price is along the upper side of the Bollinger Bands. It is also slightly below the key resistance at 1.1756. The pair is also forming what looks like an inverted head and shoulders pattern.

Therefore, the pair will likely keep rallying as bulls target the key resistance at 1.1800. This view will be invalidated if the price declines below the lowest level last week.