EUR/USD holds above 1.09 on better-than-expected PMI data, but Thanksgiving plays a factor

After two days of declines, the EUR/USD returned to positive territory following upbeat flash Manufacturing and Services PMIs in Germany and the wider Eurozone. But with today, Thursday, 23^rd November, being a public holiday in the US, financial inactivity in the New York session could well be playing a factor.

Most market analysts agree that the Federal Reserve FOMC will hold interest rates steady in their meeting next month, but this didn’t prevent a USD resurgence earlier in the week when the minutes of the last FOMC meeting were released. FOMC members struck a hawkish tone, reiterating their discomfort with the sustained high levels of inflation, especially as jobs data showed that the US economy was still outperforming expectations.

The DXY also fell back to 103.6 after two successive days of gains.

Many traders and investors were caught by surprise by the USD’s gains earlier in the week, as the prevailing narrative since the last FOMC meeting has been an end to the cycle of monetary tightening.

Today, it looks as if the USD’s gains were only temporary. The Eurozone PMI data released today appears to show that the EU economy is bottoming out, and that Germany seems to have miraculously avoided a recession. While the EUR/USD has made strong gains over the past month, traders will be asking if it can push further in the wake of continuing dollar weakness.

But, with the US Thanksgiving holiday keeping American volume low it’s easy to read too much into today’s price movements. With US traders back at their desks tomorrow, there will be a better idea of how today’s data will play out in the markets.

Technical Analysis

EUR/USD Daily Chart by XTB, prepared by Alison Heyerdahl

The EUR/USD continues to hold above the 1.0900 level, resting just above the 50% Fibonacci retracement level of the July – October 2023 downtrend. Although Thanksgiving may have played a role in subduing the bears on the back of the Eurozone PMI data, chances of a decline look unlikely.

The price remains well above the 50-day EMA (pink) and 200-day MA (orange), while the RSI, having recently entered and retreated from overbought territory, shows that further upside moves are possible. Immediate resistance is currently at the 1.09600 level, corresponding with the 61.8% Fibonacci resistance level, while support currently hovers around the 1.0860 level.