The EUR/USD barely reacted to the better than expected Purchasing Managers' Index (PMI) for the Eurozone and remained trading at the boundaries of 1.3518/20, approximately 0.12 per cent below Monday's open.
Mixed PMI's released earlier for the Eurozone's two largest individual economies, Germany and France, had placed a small dent on the EUR/USD, falling 30 points moments after their release.
The currency pair later recovered part of that decline as data for the region as a whole pointed to a solid economic improvement overall.
Some investors had pointed to a possible rally in the EUR/USD towards 1.36 but uncertainty after German elections, with Angela Merkel being forced to look for a coalition despite obtaining 42.1% of votes, weighted more on the pair than the positive economic data.
The rise in the Eurozone's composite index from 51.5 to 52.1 beat expectations (51.7) and was the seventh straight increase. According to analysts at Capital Economics, "September's rise in the euro-zone's composite PMI suggests that the bloc's recovery may have gathered pace in the third quarter."
A deeper look into the Eurozone PMI shows that new orders were the highest in over two years.
PMIs for the manufacturing sector in France, Germany, and the Eurozone were below estimates while readings for the service sector topped estimates.
However, all readings were above 50, the threshold that indicates growth, except for PMI manufacturing in France, which came in at 49.5.
Nonetheless, the composite index for France (which includes both manufacturing and services sectors) rose to 50.2, up from 48.8 in August to signal a broad stabilization of private sector output, according to economists at Markit, the firm that compiles and releases the data.
Manufacturing PMI for the Eurozone also fell from 51.4 to 51.1, with even the German index falling back a little. "But this was more than offset by a rise in the services index from 50.7 to 52.1, perhaps reflecting a further pick up in private consumption in the third quarter," Capital economics explained.
From the technical side, Karen Jones, technical analyst at Commerzbank, said that EUR/USD spent Thursday and Friday consolidating its gains following its break above the 1.3453 August high and the 1.3520 February high - these are likely to now act as support. "This move higher has introduced scope for an attempt on the 1.3711 January high," she explained.
"A move towards and failure ahead of here remains our favoured scenario," she said.
José María Rodríguez, technical analyst at fxmania, alerted that last week's weekly candlestick clearly confirmed closing prices above the resistance level of 1.34-1.3420. "However, we cannot rule out any correction towards the new support zone that was the previous resistance level of around 1.3420 (at which we would see a typical throwback movement)," he said.
"It will be important for the pair to clearly confirm this pullback with a first short-term target gain corresponding to the yearly highs of 1.3711. Above this, levels would be close to 1.40, coinciding with the theoretical minimum projection of the double bottom," he added.
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