EUR/USD: January PMI numbers are robust

The euro continued to show resistance against the dollar at the upper end of the consolidation, at around $1.0870, after an ECB member said he was taking an offensive stance.

"The ECB's communications have confused financial markets about the size of the March rate hike. In the longer term, we expect the growth outlook to improve, in line with recent surveys, which continue to cement the idea that maximum pessimism is in the rear view mirror," reads a Nomura note this morning.

Among the "surveys" in question, the PMI activity indices (purchasing managers' surveys) are well received this morning, as regards the very first estimates for the current month. The German industrial component, with its traditionally strong impact, even rose above the 50-point mark, which separates a contraction from an expansion in the sector in question. The services component for the Eurozone as a whole also rose above 50.

Chris Williams, Chief Business Economist at S&P Global Market Intelligence, offered the following insights into the raw survey data: "The chances of the Eurozone escaping a recession appear to be improving, with the latest flash PMI data showing the region's economy stabilising in January. The contraction may indeed have peaked in October, when fears of an energy crisis began to fade, thanks in part to falling prices, which were in turn helped by particularly mild weather and generous government support."

Next up are equivalent figures from the US at 15:45 and the Richmond Fed index at 16:00.

Right now, the EUR/USD is trading at $1.0868.

KEY CHART ELEMENTS
In the absence of validation of a bottom-up pattern, a continuation of neutral, thin range oscillations near the 20-day moving average (in dark blue) is expected. The very structure of the current consolidation is evidence of the Euro's advantage at the start of 2023.

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view on the EUR/USD is neutral.

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.0645 and resistance at $1.1190.