EUR/USD stays resilient despite US data disappointments

• EUR/USD climbs over 0.50% as US services sector contracts, private hiring disappoints.
• Trump doubles tariffs on steel and aluminum; markets await Xi call for US-China clarity.
• Mixed Eurozone PMIs and soft inflation may justify ECB rate cut at Thursday’s meeting.

The EUR/USD advances on Wednesday, edging up over 0.42% as the Greenback erases Tuesday’s gains following the release of weaker-than-expected economic data from the United States (US). This, along with uncertainty fueled by the trade war, pushed the pair past the 1.1400 figure after hitting a daily low of 1.1356.

Late on Tuesday, US President Donald Trump signed an executive order that doubled steel and aluminum tariffs from 25% to 50%, effective June 4, for most countries, except the UK, which remains at 25%. In the meantime, traders brace for Trump’s call with Chinese President Xi Jinping later this week, according to the White House.

US data revealed that business activity in the services sector is slowing, according to the Institute for Supply Management (ISM). Earlier, ADP reported that private companies hired fewer people than projected in May, which disappointed investors and could be a prelude to a soft Nonfarm Payrolls report on Friday.

In the Eurozone, HCOB Services and Composite Purchasing Managers Indexes (PMIs) showed mixed results, with some measures expanding while the majority remained in contraction territory. This, along with last Tuesday’s inflation report in the bloc, could justify the European Central Bank (ECB) lowering rates by 25 basis points (bps) at the June 5 meeting.

The EU economic docket will report inflation figures on the producer side, along with the ECB’s decision and President Christine Lagarde’s press conference. Across the pond, the US schedule will feature Initial Jobless Claims for the last week and speeches by Federal Reserve (Fed) officials.

EUR/USD daily market movers: Euro boosted ahead ECB’s monetary policy

• EUR/USD uptrend remains intact, but it is responding to US and Eurozone economic data during the week.
• US ADP National Employment Change in May rose by just 37K, missing forecasts of 110K and down from April’s revised 60K, indicating weak private hiring. 
• The US ISM Services PMI fell to 49.9 in May from 51.6, below the expected 52.0, signaling contraction in the services sector.
• The EU HCOB Services PMI improved in May, from 48.9 to 49.7, exceeding estimates for an unchanged figure. The Composite PMI expanded from 49.5 to 50.2, suggesting that overall business activity seems to be gathering steam.
• Financial market players have fully priced in the expectation that the ECB will reduce its Deposit Facility Rate by 25 basis points (bps) to 2% at the upcoming monetary policy meeting.

Euro technical outlook: EUR/USD cracks below 1.1400, bears eye 1.1300

The EUR/USD is upwardly biased, but so far failure to crack the weekly high of 1.1454 reached on June 3 paves the way for a pullback before the uptrend resumes. It should be said the pair hit a lower low during the current session, which means that a daily close below 1.14 could set the stage for a test of 1.13.

If EUR/USD clears 1.1454, the next resistance is 1.1500. Further gains lie overhead, with the next ceiling level seen at April highs of 1.1572, ahead of 1.16.

Conversely, If EUR/USD falls below the June 2 daily low of 1.1344, a move to 1.13 is on the cards. A breach of the latter would expose the 20-day Simple Moving Average (SMA) at 1.1284, followed by the 50-day SMA at 1.1218 and 1.1200.