Yesterday’s trade saw EUR/USD within the range of 1.0920-1.1019. The pair closed at 1.0982, soaring 0.44% on a daily basis. The daily high has also been the highest level since July 15th, when the cross registered a high of 1.1036.
At 6:59 GMT today EUR/USD was up 0.05% for the day to trade at 1.0991. The pair touched a daily high at 1.0996 at 6:58 GMT.
Fundamentals
Euro area
Manufacturing and Services data by Markit Economics – preliminary estimates
Frances manufacturing PMI probably stood in the zone of expansion for a second straight month in July, with the preliminary index estimate being at 50.7, according to the median forecast by experts. The final PMI came in at 50.7 in June as well, as reported on July 1st, up from a preliminary reading of 50.5 and following 13th consecutive months of contraction. Values above the key level of 50.0 indicate that the majority of respondents in the survey expressed optimism in regard to activity in the sector. Markit Economics is expected to release the preliminary figure at 7:00 GMT.
French preliminary services PMI probably slowed down in July, coming in at 53.8 from a final reading of 54.1 in the prior month. Markit will publish the preliminary data at 7:00 GMT.
German manufacturing Purchasing Managers Index probably remained unchanged in July, with the preliminary index value being at 51.9. If so, this would be the eighth consecutive month, during which the PMI inhabited the area above 50.0. The preliminary value is due out at 7:30 GMT.
Activity in German services sector probably remained little changed in July, with the preliminary PMI ticking up to 53.9 from a final reading of 53.8 in June. If so, this would be the 26th consecutive month, when the PMI stood in the zone of expansion and also the highest PMI level since April 2015, when the indicator stood at a final 54.0. The preliminary data is to be released at 7:30 GMT.
Manufacturing activity in the whole Euro region probably remained unchanged in July, with the preliminary Purchasing Managers Index coming in at 52.5. If so, this would be the highest reading since April 2014, when the final index was reported at 53.4, and also the 25th consecutive month of expansion. The PMI reflects the performance of the manufacturing sector in the area and is based on a survey of 3 000 manufacturing companies. National data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These member states together account for almost 90% of Euro zones manufacturing activity. The Manufacturing Purchasing Managers Index is comprised by five individual indexes with the following weights: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stock of Items Purchased (10%), as the Delivery Times index is inverted, so that it moves in a comparable direction. The preliminary data is expected at 8:00 GMT.
The preliminary services PMI in the Euro area probably was little changed in July, reaching a level of 54.2. In June the final reading of the index was reported to have been at 54.4, confirming the preliminary estimate and also being the highest index level since May 2011, when the final services PMI was reported at 56.0. If market expectations were met, July would be the 24th consecutive month, during which the index stood above the key level of 50.0. The PMI is based on data collected from a representative panel of around 2 000 private service sector companies. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland. The survey represents private sector conditions in terms of new orders, output, employment, prices etc. Markit will release the preliminary data at 8:00 GMT.
A better-than-expected performance in any of the PMI readings would certainly provide support to the common currency.
United States
Manufacturing PMI by Markit – preliminary estimate
Manufacturing activity in the United States probably remained unchanged in July, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 53.6. In June the final seasonally adjusted PMI stood at 53.6, improving from a preliminary reading of 53.4.
According to Markits statement: ”The employment subindex rose to 55.5 in June, the highest level since September 2014, from 54.6 in May. Despite weaker output growth and only a slight acceleration in total new business gains, the latest survey highlighted the fastest increase in payroll numbers since September 2014.
The output subindex slowed to 53.9, the lowest level since January 2014, from 55.2 in May. Reports from survey respondents suggested that subdued export sales and weaker investment spending patterns in the energy sector had weighed on output growth. Overall volumes of new work increased at a slightly faster pace than the 16-month low seen in May.”
Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a better-than-anticipated performance, this would have a certain bullish effect on the US dollar. The preliminary data by Markit Economics is due out at 13:45 GMT.
New Home Sales
Sales of new single-family homes probably remained unchanged at the seasonally adjusted annual rate of 546 000 during June, according to market expectations. The index of new home sales surged 2.2% to the annual rate of 546 000 in May, which has been the highest level since February 2008, when a figure of 575 000 was reported. Mays figure was supported by a 87.5% increase in sales in the Northeast region and a 13.1% surge in the West.
The median sales price of new homes sold was USD 282 800 in May, while the average sales price was USD 337 000. The seasonally adjusted estimate of new houses for sale at the end of May was 206 000, which represented a supply of 4.5 months at the current sales rate, according to the report by the US Census Bureau.
There are several points to watch out for when interpreting the New Home Sales numbers. First of all, the statistics does not record any houses that are not going to be sold immediately. As an example, the case when a house is commissioned to be built on an existing plot of land, that the purchaser owns.
Second, the statistics are taken at the point where a customer has signed a sales contract or has put a deposit down. At this point the house can be at any stage of construction.
Third, the sales figures are not adjusted to take into account the sales contracts, which are eventually canceled by the builder or the customer. However, the same house is not included in any subsequent count when it is eventually sold to another customer.
This report has a significant influence on the Foreign Exchange market, because increasing new home sales can lead to a rise in consumption, for example. The new home sales index is also an excellent indicator of any economic downturns or upturns due to the sensitivity of consumers income. When, for instance, new home sales drop over several months, this usually is a precursor to an economic depression.
In case the index showed a better-than-anticipated performance, this would support demand for the greenback. The Census Bureau is to report the official figure at 14:00 GMT.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.216% on July 23rd, after which it slid to -0.222% at the close to lose 0.001 percentage point on a daily basis.
The yield on US 2-year government bonds climbed as high as 0.727% on July 23rd, or the highest level since June 17th (0.766%), after which it fell to 0.706% at the close to lose 0.004 percentage point for the day.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, shrank to 0.928% on July 23rd from 0.936% during the prior day. The July 23rd spread has been the lowest one since July 21st, when the difference was 0.901%.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.761% on July 23rd, after which it slid to 0.744% at the close to fall 0.003 percentage point compared to July 22nd, while marking a second straight day of decrease.
The yield on US 10-year government bonds climbed as high as 2.343% on July 23rd, after which it slipped to 2.277% at the close to lose 5 basis points (0.05 percentage point) on a daily basis, while marking a third consecutive day of decline.
The spread between 10-year US and 10-year German bond yields narrowed to 1.533% on July 23rd from 1.580% during the prior day. The July 23rd yield difference has been the lowest one since July 10th, when the spread was 1.505%.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.0974. In case EUR/USD manages to breach the first resistance level at 1.1027, it will probably continue up to test 1.1073. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1126.
If EUR/USD manages to breach the first key support at 1.0928, it will probably continue to slide and test 1.0875. With this second key support broken, the movement to the downside will probably continue to 1.0829.
The mid-Pivot levels for today are as follows: M1 – 1.0852, M2 – 1.0902, M3 – 1.0951, M4 – 1.1001, M5 – 1.1050, M6 – 1.1100.
In weekly terms, the central pivot point is at 1.0951. The three key resistance levels are as follows: R1 – 1.1077, R2 – 1.1323, R3 – 1.1449. The three key support levels are: S1 – 1.0705, S2 – 1.0579, S3 – 1.0333.
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