EUR/USD, FTSE 100 Forecast: Two trades to watch

EUR/USD slips below 1.16 as weak eurozone data weighs on sentiment

EUR/USD is trading lower below 1.16 on Thursday after disappointing French and German PMI figures reinforced concerns over the eurozone growth outlook. At the same time, the U.S. dollar remains supported by hawkish Fed pricing and ongoing uncertainty around Iran.

Germany’s private sector contracted for a second straight month in May, suggesting the recovery in Europe’s largest economy continues to lose momentum. The composite PMI edged up slightly to 48.6 from 48.4, but remained below the key 50 level that separates growth from contraction.

The weakness was driven mainly by the services sector, which shrank for a second consecutive month. Manufacturing also slipped back into contraction territory, falling to 49.9 from 51.4 previously, reversing some of the tentative improvement seen in recent months.

Businesses also reported rising cost pressures, citing higher energy and transport costs linked to disruption around the Strait of Hormuz. That leaves the ECB facing an increasingly uncomfortable stagflationary backdrop, with slowing growth and persistent inflation pressures complicating the policy outlook.

Attention now turns to the wider eurozone PMI release, which is expected to remain in contraction territory. Another soft reading could add further pressure on the euro.

The dollar, meanwhile, continues to draw support from both macro and geopolitical factors. Minutes from the Fed’s April meeting showed policymakers remain open to further tightening should inflation stay stubbornly above the 2% target. Markets are increasingly pricing in another rate hike later this year, particularly with oil prices remaining elevated.

Geopolitical uncertainty is also supporting defensive positioning. Initial optimism after President Trump said talks with Iran were progressing faded quickly after he warned further military action remained possible if negotiations fail.

Later today, attention will also turn to U.S. PMI data. Stronger-than-expected figures could reinforce the view that the U.S. economy is continuing to outperform Europe, keeping EUR/USD under pressure.

EUR/USD forecast – technical analysis

 EURUSD has broken down its symmetrical triangle pattern, falling below the 200 and the 50 SMA to below 1.16. This, combined with the RSI below 50, keeps bears hopeful of further downside.

Sellers will need to break below the 1.16 level to create a low-low and bring 115.00 into focus, the April low. Below here, attention turns to 1.1450.

On the upside, any recovery would need to retake the 50 SMA at 1.1650 and the 200 EMA at 1.1680. Above here, buyers could gain traction. A rise above 117.85 creates a higher high.

FTSE 100 slips as oil prices rebound and caution returns

The FTSE 100 opened lower on Thursday as investors turned more cautious following another swing in oil prices and a muted reaction to NVIDIA earnings.

Oil prices fell sharply yesterday after hopes grew that the U.S. and Iran could move closer to a deal. Comments from President Donald Trump and reports that two supertankers had passed through the Strait of Hormuz briefly helped calm supply concerns.

However, sentiment shifted again after Trump warned further military action could follow if negotiations fail and stressed he was in no rush to secure a deal. That pushed oil prices higher once more, with supply disruption risks still hanging over the market.

In the UK, Chancellor Rachel Reeves is expected to outline measures aimed at easing cost-of-living pressures linked to higher energy prices.

The announcement comes at a politically difficult moment for Prime Minister Keir Starmer, who is facing growing pressure within the Labour Party. Political uncertainty is starting to re-emerge as a risk factor for UK markets.

Investors are also watching UK PMI data, which is expected to show business activity slowing in May, although remaining in expansion territory. Any downside surprise could reinforce concerns that higher energy costs and tighter financial conditions are beginning to weigh more heavily on the economy.

FTSE 100 forecast - technical analysis

Having reached its record high of 10,930 in early February, the FTSE has formed a series of lower highs. More recently, the price had been consolidating around its 50 SMA in a holding pattern above 10,170 and below 10,400. The price is trading at the upper bound of this holding pattern.

Buyers need to break above 10,400 to bring 10,700, the April high, back into focus.

Immediate support is seen at the 50 SMA at 10,330. However, a break below 10,170 is needed to create a lower low and open the door towards 10,000, the round number, and 9,930, the 200 SMA.