EUR/USD – A bullish breakout or just further consolidation?

• Eurozone sees marginal improvement in surveys
• US services cool in February
• EURUSD breaks through descending channel

The PMI surveys have certainly made it an eventful day in the markets, albeit one that doesn’t necessarily provide more clarity on interest rate movements in the coming months.

The eurozone PMIs displayed some improvement on the services side, with the survey moving out of contraction territory for the first time in six months. Manufacturing on the other hand reversed some of the recent progress and remained deep in contraction.

Economic resilience, even strength, in the US has proven to be a burden rather than a benefit as its cast doubt over whether the Federal Reserve should commence cutting interest rates soon.

Today’s surveys may help to alleviate some of those concerns, with the services PMI slipping back from last month to 51.3.

How bullish is this week’s breakout?

EURUSD broke higher earlier in the week after bouncing off the 61.8% Fibonacci retracement level the week prior.

EURUSD Daily

Source – OANDA

The break above the descending channel could be a very bullish signal, particularly coming so soon after the Fib bounce. The only issue may be that the pair has been largely rangebound for some time.

While this may suggest it’s gathering some upside momentum, it’s too early to say where that will take it and whether 1.10 or the late December highs will be breached.

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