EUR/USD climbs above 1.0700 on soft US Dollar on weak US PMIs

• EUR/USD gains 0.40%, breaching resistance amid disappointing US manufacturing and composite indices.
• ECB's Joachim Nagel emphasizes inflation targets before any potential rate cuts despite slowing inflation.
• Upcoming economic indicators include US Durable Goods, Q1 GDP, and Eurozone business confidence reports.

During Tuesday's North American session, the Euro appreciated against the US Dollar, up by more than 0.40%, and exchanged hands above a key resistance level. Softer than expected, US economic data weighed on the Greenback, which trades with losses against most G8 currencies. The EUR/USD trades at 1.0705 after reaching a low of 1.0638.

EUR/USD climbs to 1.0705 following worse than expected US manufacturing data

Recently, Bundesbank President and European Central Bank (ECB) member Joachim Nagel stated that the ECB must be convinced that inflation heads to its 2% goal before cutting rates. This is because most ECB policymakers have opened the door to easing policy due to the slowdown in inflation.

Aside from this, data from the United States (US), revealed by S&P Global on Tuesday, showed that business activity in the manufacturing sector shrank. The Manufacturing PMI slipped from 51.9 to 49.9 this month. On the other hand, the Services and Composite Index decelerated from 51.7 and 52.1 to 50.9, in both readings.

Other data showed that New Home Sales jumped to a six-month high, according to the US Department of Commerce, while Building Permits remained in contractionary territory despite being revised up from -4.3% to -3.7%.

In the meantime, the US economy continues to outperform its peers amid 525 basis points of rate hikes by the Fed since March 2022. Next week, the Fed will meet, and interest rates are expected to remain unchanged. Last week, the Fed parade witnessed policymakers pushing against three rate cuts, with most officials expecting just two or one.

Across the pond, Eurozone HCOB PMIs were solid, with the composite index rising from March’s 50.3 to 51.4 this month, while the services edged up from 51.5 to 52.9. the outlier was the Manufacturing PMI, slipping from 46.1 to 45.6

What should be watched ahead for EUR/USD traders?

In the US, Durable Goods Orders, the Gross Domestic Product (GDP) for Q1 2024, and the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure Price Index (PCE). On the Eurozone front, Germany’s Ifo Business Climate, Italy’s Business and Consumer Confidence, followed by Germany’s GfK Consumer Confidence.

EUR/USD Price Analysis: Technical outlook

From a technical standpoint, EUR/USD traders, despite reclaiming the 1.0700 figure, further downside is seen. If buyers achieve a daily close above the latter, that could pave the way to aim toward 1.0800, capped by the confluence of the 50 and 200-day moving averages (DMAs) at 1.0806/11. Otherwise, if the major prints a close beneath 1.0700, look for a retracement to 1.0600.