The EUR/USD has been choppy this week after rallying from 1.0520 to 1.0848 last week. This week, it retreated to 1.0660, and started to rally again. However, this rally fell short of reaching the 1.0848 high and instead price dropped back towards the 1.0660 area again. Now, despite some weaker than expected manufacturing and services PMI data, the EUR/USD rebounded again. Let’s first take a look at the data points.
German Flash Manufacturing PMI (Apr.): 51.9
Previous: 52.8 (revised from 52.4)
(click to enlarge; source: forexfactory.com)
German Flash Services PMI (Apr.): 54.4
Eurozone Flash Manufacturing PMI (Apr.): 51.9
Previous: 52.2 (revised from 51.9)
Eurozone Flash Services PMI (Apr.): 53.7
Previous: 54.2 (revised from 54.3)
Germany is the manufacturing engine of the Eurozone, so its Manufacturing PMI is more scrutinized than the other PMIs. While this month’s PMI missed forecast, we can see from the chart above the declining trend since 2014 has flattened, just above 50. This means despite decelerating since 2014, the manufacturing sector continues to expand, albeit barely. This is a positive way of looking at it I know, but looking at the EUR/USD, it appears that the market was not impacted by the soft data today.
The EUR/USD is basically stuck in consolidation and we shouldn’t make too much of these intra-week, intra-consolidation swings. One thing we can say is that since EUR/USD was able to rally despite poor data, it shows that bears are weak. We can’t say much about the bulls in this market neither, because they have not shown much conviction. However, the 1H bullish candles following the data set do give the EUR/USD a slight bullish bias.
We should expect the pair to test the 1.08 handle again. A break above that then opens up the 1.0848 high. If the market does reach the 1.0848 high, we should anticipate further upside risk, simply because this week’s bearish action stopped at 1.0660 instead of falling lower towards 1.0520, which indicates that bulls are anchoring higher within this consolidation/correction mode.
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