Eur/usd - page 260
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EUR/USD: Euro Falls Below $1.1150 on Mixed PMIs
The manufacturing PMI in Germany came out at 52.1, slightly lower than 52.8 in March, while the French gauge printed 48.0 and ticked higher from 48.8 in March, Markit advised on Monday.
The pair was trading at intraday lows, around $1.1135, with the market probably poised to test the strong support area at $1.11 - $1.1040 in the near term.
The euro received a short-term boost from skyrocketing German yields, when bonds came under heavy selling pressure. Moreover, the long-dollar positions have been squeezed out on sharp short covering.
US fundamentals have deteriorated in previous weeks, with a very weak Q1 reading only at 0.2%, causing some panic among investors. The Fed, however, confirmed the view that the central bank is still on pace to raise rates this year and acknowledged the latest slowdown in the US economy to be only transitory, caused mainly by a harsh winter.
The dollar should therefore start to regain its lost positions and start to strengthen again. Market participants will eye the ISM non-manufacturing index on Tuesday, with all eyes on Friday's payrolls data.
The greenback bounced on Friday after Cleveland Federal Reserve (Fed) President Loretta Mester said a June rate hike was still on the table if the next employment report was strong, while San Francisco Fed President John Williams added that the "Fed should avoid a predictable tightening path", and that, yes, "every FOMC meeting is on the table for raising rates".
US payroll data to bolster USD
"The coming week will be pivotal for the USD. Given strong initial claims and job openings data, our economists expect a solid rebound in April non-farm payroll employment, to 275K. They also expect hourly earnings to pick up to 2.3% y/y, which would be another indication that the Fed may not be able to hold back from rate rises for very long. While the rise in US yields appears mainly momentum and positioning driven, taking cues from a sell-off in bunds this past week, we think strong data will create a more fundamental driver for the rise in US yields, which would be favourable for the US dollar," analysts at BNP Paribas believe.
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EUR/USD: Euro Slumps After Mixed PMIs, NFP Positioning
The euro tumbled from highs above the $1.12 handle during the European trading session on Monday, following a set of manufacturing PMIs from the euro zone's major economies. The pair will be tested this week, as the most influential report of the month comes on Friday when non-farm payrolls are released in the US.
The euro edged down 0.46% to $1.1138, rebounding after touching a fresh session lows of $1.1122 after the set of manufacturing data, with a strong support area laying at $1.11 - $1.1040 in the near term.
Europe's lackluster PMIs
The manufacturing PMI in Germany came out at 52.1, slightly lower than the 52.8 in March, while the French gauge printed 48.0 and ticked higher from 48.8 in March, Markit advised on Monday.
The euro zone factory PMI revealed 52 points after March's 52.2, compared to expectations of 51.9, Spain's manufacturing PMI fell to 54.2 points in April, a slight tick down from 54.3 a month before, while themanufacturing sector in Italyposted 53.8 points, a rise from March's 53.3, and better than the 53.4 points expected by analysts.
US data eyed
In the US, today's agenda will only see factory orders that are expected to rise 2% in March, which would be a strong rebound from the 0.2% growth posted in February.
For the week ahead, the major market mover is expected to be Friday's non-farm payrolls report that will say more about the strength of the country's labor market.
"The coming week will be pivotal for the USD. Given strong initial claims and job openings data, our economists expect a solid rebound in April non-farm payroll employment, to 275K. They also expect hourly earnings to pick up to 2.3% y/y, which would be another indication that the Fed may not be able to hold back from rate rises for very long. While the rise in US yields appears mainly momentum and positioning driven, taking cues from a sell-off in bunds this past week, we think strong data will create a more fundamental driver for the rise in US yields, which would be favorable for the US dollar," analysts at BNP Paribas believe.
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EUR/USD: Trading the ISM Non-Manufacturing PMI
The ISM Non-Manufacturing PMI (Purchasing Manager Index) is based on a survey of purchasing managers in sectors other than manufacturing. Respondents are surveyed for their view of the economy and business conditions in the US. A reading which is higher than expected is bullish for the dollar.
Here are all the details, and 5 possible outcomes for EUR/USD.
Published on Tuesday at 14:00 GMT.
Indicator Background
Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could be an indication of the health of the economy.
The PMI continues to point to expansion in the services sector, with readings well over the 50-point line. In March, the index came in at 56.6 points, very close to the estimate. Little change is expected in the April report.
Sentiments and levels
With the recent improvement by the euro, the correction we are seeing in the pair is now well established. This does not change the bigger picture which is for a lower euro (and could change later in the year), but after the breakout of 1.1050, the turn around in German bunds and the momentum we are seeing, it could get worse for EUR/USD bears before it gets better. The US dollar needs better numbers to recover, and this isn’t at hand. The euro could remain bid also with mediocre figures. So, the overall sentiment is bearish on EUR/USD towards this release.
Technical levels, from top to bottom: 1.1450, 1.1373, 1.1270, 1.1113, 1.1050, and 1.1000.
5 Scenarios
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Thank you for the daily news.
On yesterday session EURUSD initially tried to rally but found strong selling pressure at Friday’s open to turn around and close near the low of the day. The bearish correction is underway with the next stop at 1.1034 if it holds.
EUR/USD: Pair Tests Essential Support Zone at $1.11
The pair dropped to test the critical support zone at $1.11 - $1.1040, which currently holds a neutral trend. If breached to the downside, the latest correction will be over and the bearish trend will be reactivated.
Traders were well bidding the greenback on Tuesday and the pair dropped sharply around 50 pips during Frankfurt trading, making bulls angry at levels around $1.11. Bulls need to hold this area if they want to push the pair back to the crucial resistance at $1.1280, otherwise the latest correction would be over and the bearish bias will return to the EUR/USD pair.
At the London open, EUR/USD was seen dipping below $1.11 and was trading around 0.5% lower on the day.
Today will bring interesting macro news from the US, starting with trade balance data and finishing with an ISM non-manufacturing release. Strong readings are required to maintain bullish momentum for the greenback, otherwise further upside in the pair would be possible.
Looking ahead, the critical non-farm payrolls figures are due on Friday, expected to post a 200,000 gain, along with the unemployment rate, which is predicted to soften to 5.4% from 5.5%.
On Monday, the manufacturing PMI in Germany came out at 52.1, slightly lower than the 52.8 in March, while the French gauge printed 48.0 and ticked lower from 48.8 in March. The shared currency remained untouched by these figures, although it was slowly easing towards $1.11.
Watch non-manufacturing ISM for payroll reassurance
"The employment component of today’s non-manufacturing ISM report will be closely watched as market participants refine their expectations for Friday’s employment report. The employment component of the manufacturing index fell sharply on Friday, dropping below 50 for the first time since May 2013. A solid reading on the non-manufacturing side would provide reassurance ahead of Friday’s key release. Our economists expect a strong 275k reading on Friday and, with EURUSD’s rally last week seemingly inconsistent with price action in US rates markets, we think risk reward is increasingly attractive for entering new long USD positions ahead of Friday’s release," analysts at BNP Paribas wrote in a note on Tuesday.
EU lifts eurozone growth forecast
European Union economists said cheaper oil and central bank stimulus should help deliver faster growth in the region this year, but questioned whether Europe's economy would continue to expand at these rates over the longer term.
The forecasts from the European Commission, the EU's executive arm, said the scars of the region's debt crisis--high unemployment, high government and corporate debt burdens, banking system problems and weak investment spending--will likely weigh on the region's growth for years to come.
"The EU economy has rarely benefited from such a strong conjunction of support factors," Marco Buti, the head of the commission's economics directorate. "But will the economy be able to generate a self-sustained and balanced expansion once these temporary tailwinds fade? The answer is not self-evident. The legacy of the crisis will continue to be felt for years to come."
The forecasts published on Tuesday also showed the diverging fortunes of the countries that suffered most during the eurozone debt crisis. The Spanish and Irish economies are expected to be among the fastest-growing in the bloc, while Greece's growth forecasts were slashed as the standoff between the government and its creditors damaged confidence.
Economists at the European Commission, the EU's executive arm, forecast that gross domestic product in the 19-nation eurozone should grow at 1.5%, up from their previous forecast in February of 1.3%. They forecast growth in the 28-nation EU at 1.8%, up from 1.7% in February.
The commission raised its forecast for Germany to 1.9% from 1.5%. German domestic consumption will drive growth, the commission said, buoyed by the strong job market, immigration and low interest rates.
The commission said Ireland should grow at 3.6% this year, the fastest rate in the eurozone. Spain is expected to grow at 2.8%. But the commission, in its first significant estimate of Greece's economic prospects for this year, slashed the country's forecast to 0.5% from 2.5%.
Uncertainty in Greece "is taking a heavy toll on investment, which is also suffering from limited credit supply from the financial sector and a build-up of arrears from the public sector," the commission said.
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Euro Factory Gate Inflation Grows Over Month: March PPI
Industrial producer prices in the euro area, a proxy for the closely watched consumer prices, retreated again in March, with the gauge booking its 20th straight month in contraction on an annual basis, Eurostat showed on Tuesday. Still, the downturn was milder than a month ago, while on a month-on-month basis, prices grew for the second time in five months.
The Producer Price Index (PPI), an indicator tracking price change from the perspective of the seller, trashed 2.3% year-on-year in the third month of the year, easing the downturn given February's 2.8% decline.
Analysts had called for such a slide.
Month-on-month data
Furthermore, the gauge rose a month-on-month basis, as it added 0.2%, falling shy of estimates that had called for a 0.3% uptick.
During the previous month, the gauge close the door on the four-month-long contraction as it rose a revised 0.6%.
Producer price increases, unless absorbed by intermediaries and retailers, translate into higher consumer prices, annual growth of which the ECB aims to restrict to below but close to 2% in the medium term.
Consumer price inflation in the euro zone in April moved higher from negative territory, where it spent four straight months and posted zero growth, offering yet another signal that deflationary worries in the bloc are easing, preliminary data showed last week.
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The EUR/USD is still trying to break the resistance line 1.1200 but still no luck. price keep rebounding from the resistance line.
USD attempted to recover for lost last week as approached to the support of the 89-day SMA, which is around 1.1090. In price drop below this value, we can expect a test of the psychological level at 1.1000, and breaking below this level will confirm the advantage of the dollar.