Caution Over the Euro's Direction Amid Strong Economic Indicators

Caution Over the Euro's Direction Amid Strong Economic Indicators

06.04.2023

In the U.S. currency market yesterday, the U.S. dollar fell against the yen after the U.S. March ISM Non-Manufacturing Index, released yesterday, came in at 51.2, below the market forecast of 54.5. The USD/JPY pair fell from 131.837 to 130.652.The pair continued to decline, with its upside capped by the 20-period moving average on the hourly chart. As economic indicators released this week have consistently fallen short of market expectations, attention is expected to shift toward tomorrow’s U.S. employment report. We will carefully monitor the U.S. dollar’s price action ahead of the employment report.

European currencies fell against the U.S. dollar, even though Germany’s February manufacturing new orders—released yesterday—came in at -5.7% year-over-year, better than the market forecast of -9.4%.The EUR/USD pair fell from 1.0968 to 1.0884, dropping below the 20-period moving average (MA) on the 4-hour chart. Since the 4-hour RSI for EUR/USD is showing a bearish divergence—falling in contrast to the direction of the candlesticks—we will need to closely monitor whether the decline in EUR/USD will continue.

Today, during Asian trading hours, Swiss employment figures will be released at 14:45, followed by German industrial production and UK Halifax house prices at 15:00; during European trading hours, the UK construction PMI will be released at 17:30, and U.S. Challenger layoff announcements at 20:30;during U.S. trading hours at 21:30, Canadian employment figures and U.S. initial jobless claims; at 23:00, the Canadian Ivey PMI and remarks by U.S. Federal Reserve Bank of St. Louis President Bullard; and at 23:30, U.S. weekly natural gas inventories.We should remain cautious about the direction of the euro, which is falling despite strong economic indicators.