Is the uptrend resuming for EUR/USD?

Buying EUR/USD at the 50 SMA, As US Services and Manufacturing Improve

Posted Tuesday, January 24, 2023 by
Skerdian Meta • 2 min read

EUR/USD resumed the bullish trend in the second week of this month, after consolidating during December and retreating during the first week of this year. Buyers pushed above 1.09, but the bullish momentum has slowed and buyers found it difficult to hold the price above 1,09 yesterday.

Today we saw a retreat lower after the US services and manufacturing PMI reports, which came in stronger than expected, although both sectors are still in contraction. The US jumped 20-30 pips higher after that report was released, but the 50 SMA (yellow) was holding as support on the H4 chart for this pair.

EUR/USD H1 Chart – The 200 SMA Holds As Support

The lows keep getting higher on the H1 chart

On the H1 timeframe chart above, we see that the 200 SMA (purple) has been acting as support, holding the price on dips lower. This pair dipped earlier today and we decided to open a buy forex signal above the 200 SMA. Now the price is bouncing higher, so the trade looks good. Below is the manufacturing and services report:

US January S&P Global Flash Data

global PMI SP US

  • January S&P Global flash manufacturing PMI 46.8 points vs 46.0 expected
  • December manufacturing was 46.2 points
  • Services PMI for January 46.6 points vs 45.0 expected
  • Prior services were 44.7 points
  • Composite PMI 46.6 points vs 44.6 prior
  • New orders declined, led by manufacturing
  • Cost burdens increased for the first time in eight months
  • Backlogs of work fell
  • Business optimism hit a four-month high

EUR/USD Live Chart


Commentary by the PMI

This is a better reading but below 50 still points to a contraction. Commenting on the US flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January. Although moderating compared to December, the rate of decline is among the steepest seen since the global financial crisis, reflecting falling activity across both manufacturing and services.

“Jobs growth has also cooled, with January seeing a far weaker increase in payroll numbers than evident throughout much of last year, reflecting a hesitancy to expand capacity in the face of uncertain trading conditions in the months ahead. Although the survey saw a moderation in the rate of order book losses and an encouraging upturn in business sentiment, the overall level of confidence remains subdued by historical standards. Companies cite concerns over the ongoing impact of high prices and rising interest rates, as well as lingering worries over supply and labor shortages.

“The worry is that, not only has the survey indicated a downturn in economic activity at the start of the year, but the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which could encourage a further aggressive tightening of Fed policy despite rising recession risks.”

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