Euro Gains On Poor US ISM Manufacturing PMI Data

Euro Gains On Poor US ISM Manufacturing PMI Data
June 4, 2019


The euro gained more than 100 pips against the greenback yesterday following the release of disappointing US manufacturing PMI in the US session. The release of German manufacturing PMI and Eurozone manufacturing PMI data that met expectations also enabled the euro to gain ground against the greenback. Speculators and investors, on the contrary, stayed away from the US dollar on concerns of inverted US yield curves and the likelihood of a Fed rate cut. The EUR/USD pair is trading near its day high of 1.1262 at the time of writing this article, after reversing from a low of 1.1160 yesterday.

Despite the overall risk-off sentiment and uncertain global economic outlook, the EUR/USD pair opened firmly yesterday as the financial markets was worried about the likely impact of US import duties on Mexican goods. The currency pair consolidated further on the release of Markit/BME Germany manufacturing PMI and Markit eurozone manufacturing PMI data.

The headline IHS Markit/BME Germany Manufacturing PMI, which reflects the performance of manufacturing industries, recorded a reading of 44.30 in May, the lowest reading since mid-2012 and a notch down from 44.40 posted in the previous month. Even though the reading indicates contraction, still, the market did not turn bearish towards the euro as the figures met analysts’ expectations.

Likewise, the IHS Markit Eurozone Manufacturing PMI contracted to a six-year low of 47.7 in May, from 47.9 in April. Notably, the manufacturing PMI has contracted for the fourth successive month.

The report says: “A fourth successive monthly drop in output and a further steep decline in new orders underscored how the sector remains in its toughest spell since 2013. Companies are tightening their belts, cutting back on spending and hiring. Input buying, inventories, and employment are all now in decline as manufacturers worry about being exposed to a further downturn in demand.”

The market, however, discarded the gloomy note as the reported figures were in line with economists’ expectations.

The EUR/USD pair got a big boost after the release of disappointing US ISM manufacturing PMI for May in the US session. The index contracted to 52.1, from the earlier figures of 52.80, missing the level of 53 expected by analysts’.

Despite the widening US-German yield spread, the EUR/USD continued to rally. The currency’s performance is expected to be affected by the eurozone CPI and US factory orders data to be released later today.

Technically, as shown in the image below, the EUR/USD pair has received firm support at 1.1185. The next resistance is expected only at 1.1370. The oscillator of moving average also has a positive reading. As a result, we can expect the uptrend to continue in the short-term.

EUR - technical analysis - 4th June 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.


Andrew Wright

Prior to founding in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.

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