EUR/USD snaps below 1.08 after US Services PMI upbeat reading masks Manufacturing contraction

EUR/USD falls below 1.08 after upbeat US Services PMI reading.
Earlier this Monday, preliminary PMI data for March from Germany, France and the overall Eurozone comes in mixed.
Markets brace for comments from US President Trump as another cabinet meeting is called for on Monday.

The EUR/USD dips lower and snaps 1.08 after the March preliminary United States (US) Purchase Manager’s Index (PMI) reading came in stronger on the Services sector than expected. Overall, the pair is expected to stay around 1.08 for now after United States (US) officials commented on Monday that the upcoming reciprocal tariffs will rather be targeted by sector and country, not at all simply broad-based as US President Donald Trump had originally announced.

Meanwhile, on the economic data front, the preliminary Purchasing Managers Index (PMI) for March is being released on Monday. In the old continent, S&P Global and Hamburg Commercial Bank (HCOB) PMIs have been upbeat in France, beating estimates and February’s readings in both the manufacturing and services sectors, but they still signal contraction. Meanwhile, results for Germany and the overall Eurozone have been mixed. The US PMI reading was an upbeat surprise for the Services sector while the Manufacturing sector fell into contraction.

Daily digest market movers: Another week full of headlines

European PMI data has already been released:
- For France, upbeat numbers with the Services component coming in at 46.6, beating the 46.3 expected and the previous reading of 45.3. The Manufacturing sector component jumped to 48.9, coming from 45.8 in February and beating the 46.2 expected.
- In Germany, the Services sector reading fell to 50.2, missing the 51.4 estimate and below the previous 51.1. The Manufacturing component popped to 48.3, beating the previous 46.5 and above the consensus of 47.7.
- In the overall Eurozone, Services PMI decreased to 50.4 from 50.6 previously, falling below the 51.0 expected. However, the Manufacturing reading accelerated to 48.7 from 47.6 in February, beating the 48.0 expected.
The Chicago Fed National Activity Index for February came in as a surprise 0.18, beating the previous -0.03 which got revised even to -0.08.
The US preliminary PMI data for March by S&P Global came in as a mixed surprise. The Services PMI jumped to 54.3, beating the 51.2 consensus, coming from 51.0. Manufacturing fell in contraction to 49.8, missing the 51.9 estimate and from 52.7.
At 19:10 GMT, Vice Chair for Supervision of the Board of Governors of the Federal Reserve System Michael Barr will speak in a moderated discussion on small business lending at an event hosted at Advancing Innovation and Fairness in Small Business Finance, Washington, D.C.
Equities are mixed with European equities flat while US equities are rallying over 1% higher.
The CME Fedwatch Tool projects a 85.1% chance for the Federal Reserve (Fed) to keep interest rates unchanged in the May meeting while there is a slim 14.9% chance for a rate cut.
The US 10-year yield trades around 4.32% and is looking for direction after the steep correction from last week.

Technical Analysis: Stuck in the middle

The EUR/USD pair is stuck in a very tight range on the weekly chart. The fact that EUR/USD closed below the 200-week Simple Moving Average (SMA) at 1.0854 last week means that a return to 1.10 is not in the cards immediately. On the other hand, the support from the 100-week SMA at 1.0782 and the 55-week SMA at 1.0740 reveal that a turnaround to 1.05 is not set to materialize quickly either.

On the upside, 1.1000 is the key level to look out for. Once that level is breached, the pair enters the famous 1.1000-1.1500 range, where it often tends to stay for quite some time. First, of course, the 200-week SMA at 1.0854 needs to be reclaimed.

On the downside, the support from the 100-week SMA at 1.0782 and the 55-week SMA at 1.0740 should be enough to support any selling pressure EUR/USD might face. In case it does not hold, 1.0667 and 1.06 are the next targets to the downside.

EUR/USD: Weekly Chart