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EUR/USD – The dollar strengthens; PMI data release today – Analysis for April 23rd 2018

The U.S. dollar climbed to the highest level in three weeks and the EUR/USD pair dropped below the 1.23 level on Friday. The currency continues to stregthen today, supported by a significant surge in Treasury yields. Support is set at 1.22, resistance at 1.23.

Commentary:

The dollar index, measuring its strength agains six major currencies reached the highest level in two weeks on Friday. Further support for the greenback was brought by a surge in Treasury yields, with the 10-year touched a peak of 2.979 percent, the highest level seen since January 2014.

Geopolitical tensions and fears have eased, so the macroeconomic data took the spotlight once again. The dollar got further support after Fed’s Lael Brainard comment that boosted hopes that the central bank would hike rates three more times this year. Expectations for such a move may grow even further if today’s PMI reading come above the market consensus.

The euro remains on the backfoot as investors are awaiting the European Central Bank’s monetary policy meeting later this week. Chances are high that EBC’s head Mario Draghi will tone down the moods of the euro bulls and suggest a delay of the policy’s normalization. PMI data will be released today also in the euro zone. Last reading were quite a disappointment, so todays numbers will surely influence the common currency.

Today’s releases:

  • 10:00 Euro zone – PMI manufacturing/services
  • 15:45 USA – PMI manufacturing/services

Analysis:

Pic.1. EUR/USD chart.

The EUR/USD pair dropped below the previous support at 1.23 amid the strentghening of the U.S. dollar. Today’s PMI readings in the euro zone and the U.S. will be the main driving factor for the pair today. If the numbers from Europe won’t come strong, while the U.S. ones come above the expectations, this may further support the dollar and bring an attempt to break down the 1.22 level.

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