Yesterday’s trade saw EUR/USD within the range of 1.1098-1.1352. The pair closed at 1.1106, plummeting 2.05% on a daily basis. It has been the sharpest daily loss since January 22nd, when the pair depreciated 2.10%. The daily low has been the lowest level since September 4th, when the cross registered a low of 1.1088.
At 6:24 GMT today EUR/USD was up 0.01% for the day to trade at 1.1107. The pair touched a daily high at 1.1123 at 5:59 GMT. In early Asian trade EUR/USD widened losses, tumbling to as low as 1.1076, or the lowest level since August 19th, when a daily low of 1.1017 was reached.
Yesterday the euro lost ground sharply against its major peers, as at the press conference following the official policy decision, European Central Bank President Mario Draghi hinted on additional monetary easing.
Today the cross may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
Euro area
Manufacturing, Services PMIs
Frances manufacturing Purchasing Managers Index probably stood in the zone of expansion for a second straight month in October, with the preliminary index estimate being at 50.2, according to the median forecast by experts. The final PMI came in at 50.6 in September, as reported on October 1st, up from a preliminary reading of 50.4 and following two 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 October, coming in at 51.6, down from a final reading of 51.9 in the prior month. Markit will publish the preliminary data at 7:00 GMT.
German manufacturing Purchasing Managers Index probably slowed down in October, with the preliminary index value being at 51.7. If so, this would be the 11th consecutive month, during which the PMI inhabited the area above 50.0 and also the lowest level since May (51.1). In September the PMI came in at a final 52.3, down from a preliminary reading of 52.5. The flash value is due out at 7:30 GMT.
Activity in German services sector probably was little changed in October, with the preliminary PMI slipping to 53.9 from a final reading of 54.1 in September. If so, this would be the 29th consecutive month, when the PMI stood in the zone of expansion, but also the lowest PMI level since July, when the indicator stood at a final 53.8. The preliminary reading is to be released at 7:30 GMT.
Manufacturing activity in the whole Euro region probably slowed down for a fourth straight month in October, with the preliminary Purchasing Managers Index coming in at 51.8. If so, this would be the 28th consecutive month of expansion, but also the lowest index reading since February (51.0). In September the gauge stood at a final 52.0, which matched the preliminary reading. 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 index value is expected at 8:00 GMT.
The preliminary services PMI in the Euro area probably dropped for a second straight month in October, reaching a level of 53.5. In September the final reading of the index was reported at 53.7, down from a preliminary estimate of 54.0. If market expectations were met, October would be the 29th consecutive month, during which the index stood above the key level of 50.0, but it would also be the lowest PMI reading since January (52.7). The PMI is based on data collected from a representative panel of about 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 reading at 8:00 GMT.
A worse-than-expected performance in any of the PMI readings would have a moderate bearish effect on the common currency.
United States
Manufacturing PMI by Markit – preliminary reading
Manufacturing activity in the United States probably slowed down in October, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 52.8, according to market expectations. If so, this would be the lowest reading since October 2013, when the PMI was reported at 51.8. In September the final seasonally adjusted PMI stood at 53.1, improving from a preliminary 53.0.
According to Markits statement: ”Both output and new business volumes continued to expand at slower rates than those seen earlier in 2015, which contributed to a marked slowdown in job creation during the latest survey period. A renewed fall in input prices provided support to operating margins in September. That said, factory gate charges were unchanged over the month, which ended a three-year period of sustained output price inflation”.
Values above the key level of 50.0 indicate optimism (expanding activity). In case the flash manufacturing PMI showed a worse-than-anticipated performance, this would have a moderate bearish effect on the US dollar. The preliminary PMI reading by Markit Economics is due out at 13:45 GMT.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.246% on October 22nd, after which it slid to -0.317% at the close to lose 6.7 basis points (0.067 percentage point) compared to October 21st. It has been the second consecutive drop.
The yield on US 2-year government bonds climbed as high as 0.641% on October 22nd, or matching the high from the previous trading day, after which it fell to 0.617% at the close to lose 0.008 percentage point compared to October 21st, while marking a second straight trading day of decline.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, expanded to 0.934% on October 22nd from 0.875% on October 21st. The October 22nd yield spread has been the largest one since September 25th, when the difference was 0.936%.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.585% on October 22nd, after which it slid to 0.500% at the close to lose 7.2 basis points (0.072 percentage point) compared to October 21st. It has been the second consecutive drop.
The yield on US 10-year government bonds climbed as high as 2.055% on October 22nd, after which it slipped to 2.037% at the close to lose 0.009 percentage point compared to October 21st. It has been the fourth increase in the past nine trading days.
The spread between 10-year US and 10-year German bond yields widened to 1.537% on October 22nd from 1.456% on October 21st. The October 22nd yield difference has been the largest one since September 23rd, when the spread was 1.553%.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.1129
R2 – 1.1153
R3 (range resistance) – 1.1176
R4 (range breakout) – 1.1246
S1 – 1.1083
S2 – 1.1059
S3 (range support) – 1.1036
S4 (range breakout) – 1.0966
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.1392
R1 – 1.1450
R2 – 1.1555
R3 – 1.1613
S1 – 1.1287
S2 – 1.1229
S3 – 1.1124
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