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Euro and Sterling Bounce from Key Support: Data Decides Next Move
Euro and sterling bounced from 1.1600 and 1.3300 support on dollar profit-taking. PMI data and US jobless claims this week will determine if the rebounds extend or fade.
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EUR/USD and GBP/USD have recovered from sharp tests of support levels at 1.1600 and 1.3300 respectively. The rebounds are driven by profit-taking on the US dollar rather than a fundamental change in the macro outlook. Traders now face a data-heavy calendar that will determine whether these bounces extend or fade into range-bound trading.
The Transmission Path: Dollar Weakness and the Data Pipeline
The initial sell-off in the European currencies was a straightforward dollar bid. GBP/USD fell toward 1.3300; EUR/USD tested 1.1600. Both levels held, triggering a corrective rebound as short-dollar positions were covered. The question is whether this pause in dollar strength turns into a reversal.
PMI Data as the Next Catalyst
Purchasing Managers’ Index (PMI) prints for the eurozone, the UK, and the US are the next scheduled macro inputs. The market already prices a slowdown in US business activity after recent weak readings. A US PMI undershoot could weaken the dollar further, giving EUR/USD and GBP/USD room to extend their recoveries. A beat would reinforce the dollar bid and likely send the pairs back toward recent lows.
US Housing and Jobless Claims
Beyond PMIs, US housing market data and initial jobless claims will add colour to the labour and housing sectors. Weak housing starts or rising claims would amplify the narrative of a cooling US economy, supporting the euro and sterling. Strong data would do the opposite. The market is in wait-and-see mode until these prints land.
EUR/USD: Piercing Pattern and the 1.1670–1.1700 Zone
EUR/USD formed a bullish piercing candlestick pattern on the daily chart after bouncing from 1.1600. That pattern signals potential upside toward 1.1670–1.1700, a zone that contains the 50-day moving average. A break above 1.1700 would open the path to 1.1750. On the downside, a move below yesterday’s low would negate the pattern and expose 1.1540–1.1500.