EURUSD Under Pressure

The latest data out of the eurozone today offered some small hope for bulls though, in light of the resurgence in USD, EUR remains under pressure for now. The eurozone service sector PMI for April showed an increase to 50.5 from the prior month’s 50.3 which was also the consensus forecast this time. Given that a large swathe of the eurozone is currently battling a third wave of the virus, meaning extended lockdown measures, the data is encouraging.

Data Still Weak

However, at just a touch over the neutral level, the sector is still very weak and on the back of recent data showing that the eurozone entered a double dip recession in Q1, the continued decline in EUR is not puzzling. The services sector has certainly been harder hit than manufacturing which, as a global theme, we have seen remain resilient during the pandemic as a result of the surging demand created by the rise in online shopping. However, the manufacturing PMI for April, released, earlier this week, showed that while the sector was still strong, at 62.9 it was below both the prior and expected 63.3 reading.

Spain Strongest Services Sector Last Month

Looking at the breakdown of today’s data, notably the Spanish sector has been the strongest performer at 54.6 on the month, a strong increase from the prior month’s 48 reading, which has seen the country’s services sector moving back into growth territory. Italy, however, was the weakest at 47.3, a decline from the prior month’s reading above 48.

European Summer Tourism In Doubt

The big challenge for the eurozone currently is the slow pace of vaccinations when compared with the UK and US. With vaccination numbers lagging far behind, the economic bloc has seen several key member states suffering from a third outbreak of the virus which has resulted in the reversal of reopening measures and extended lockdowns. With this in mind, the projected return to broad European travel this summer, and the resurgence of the European tourism sector, is still in doubt.

Vaccinations Picking Up

There are signs that the pace of vaccination is starting to increase, though it is not yet clear if enough momentum will have been achieved in time for the summer. If tourism is not able to return this year, this would strike another significant blow to the eurozone economy and is certainly something the ECB will be watching over coming months.

Technical Views

EURUSD

The attempted breakout above the bear channel from 2021 highs saw EURUSD running into selling pressure with the par subsequently reversing back into the channel. For now, price is still holding above the 1.1910 level which is the key downside pivot to note. While this level holds, there is still scope for a further push higher. Below there, focus will shift to the rising trend line support and the 1.1711 and 1.1609 levels next.

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