Eurozone economy outperforming expectations

The Eurozone economy rebounded in March as robust service sector figures offset the persistent weakness in the manufacturing sector. According to S&P Global, the Composite Purchasing Managers' Index (PMI) increased to 54.1 from 52.0 in February, crossing the 50-point threshold that implies positive economic development in comparison to analyst estimates.

While the service sector gained well, new orders in manufacturing fell, with the manufacturing PMI falling to 47.1 from 48.5. Conversely, the services PMI jumped to a nine-month high of 55.6 from 52.7, with sustained growth visible in both Germany and France, the region's two major economies. Meanwhile, in order to keep up with the increased economic activity in the services sector, businesses are increasing employment at the quickest rate since May of last year, resulting in the eurozone employment index rebounding to 54.3 from 51.9.

However, according to European Central Bank (ECB) data released on Monday, the volume of bank loans to companies in the eurozone slowed for the fourth consecutive month and is expected to fall further in the coming months due to the economic downturn and increased caution from lenders, including the ECB accelerating its rate hike.

According to the Ifo survey, the German Ifo Business Climate Index increased in March to 93.3 from 91.1 in February, improving for the fifth consecutive month and reaching the highest level in nearly a year, indicating that Europe's largest economy remains stable, with more than 9,000 companies surveyed by Ifo remaining optimistic about the German economy despite recent banking sector turmoil.

On Friday, European Central Bank President Christine Lagarde told EU leaders that the eurozone's banking sector remained strong due to a strict regulatory environment. The German government upgraded its economic projection for 2023 in January, anticipating 0.2% growth, and expects the economy to recover starting in the spring.

French economic activity was also greater than predicted in March, owing to growth in the services sector. The March Purchasing Managers' Index (PMI) for French services was 55.5, up from 53.1 in February, while the March PMI for French manufacturing was 47.7, up from 47.4 in February.

Analysts estimate the ECB's terminal rate this year to be 4.00% as the employment index continues to grow, indicating that price pressures in the eurozone will remain over the 2% target range until 2025, despite the ECB hiking interest rates by 50 basis points to 3.50% this month.

On the side of the most recent US dollar currency pair. It was flat and weakened on the anticipation that the crisis in the US banking sector will be controlled after First Citizens BancShares has agreed to acquire Silicon Valley Bank on Monday, but confidence in the sector remains fragile.

This week's interesting economic data that is expected to affect the euro and dollar includes Germany and Eurozone CPI for March, which are scheduled to be published on Thursday and Friday, as well as March consumer confidence data and US fourth-quarter GDP figures, which are scheduled to be published on Tuesday and Thursday, implying that investors may enter risk-on mode during this time.

Data for Technical Analysis (5H) CFD EUR/USD

Resistance : 1.0819, 1.0824, 1.0832

Support : 1.0803, 1.0798, 1.0790                 

5H Outlook      

1H Outlook

Source: Investing.com                           

Buy/Long 1 If the support at the price range 1.0798 - 1.0803 is touched, but the support at 1.0803 cannot be broken, the TP may be set around 1.0823 and the SL around 1.0795, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.0819 - 1.0824, TP may be set around 1.0832 and SL around 1.0800, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.0819 - 1.0824 is touched, but the resistance at 1.0819 cannot be broken, the TP may be set around 1.0802 and the SL around 1.0827, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.0798 - 1.0803, TP may be set around 1.0790 and SL around 1.0822, or up to the risk appetite.       

Pivot Points Mar 28, 2023 04:01AM GMT

Sources: Investing 1, Investing 2