Friday’s trade saw EUR/USD within the range of 1.0638-1.0745. The pair closed at 1.0646, losing 0.82% on a daily basis, while marking its first drop in the past three trading days and also the sharpest one since November 16th, when it depreciated 0.85%. In weekly terms, EUR/USD plummeted 1.23% last week, or the most since the week ended on November 8th, when the pair lost 2.40% of its value.
At 7:18 GMT today EUR/USD was losing 0.29% for the day to trade at 1.0615. The pair touched a daily low at 1.0600 during mid-Asian trade. It has been the lowest level since April 15th, when a daily low of 1.0570 was registered.
Today EUR/USD trading may be influenced by a number of macroeconomic reports as listed below.
Fundamentals
Euro area
Manufacturing, Services PMIs – preliminary readings
German manufacturing Purchasing Managers Index probably remained unchanged in November, with the preliminary index value being at 52.1, matching the final reading in October. If so, this would be the 12th consecutive month, during which the PMI inhabited the area above 50.0. The flash value is due out at 8:30 GMT.
Activity in German services sector probably was little changed in November, with the preliminary PMI slipping to 54.3 from a final reading of 54.5 in October. If so, this would be the 30th consecutive month, when the PMI stood in the zone of expansion. The preliminary reading is to be released at 8:30 GMT.
Manufacturing activity in the whole Euro region probably remained unchanged in November, with the preliminary Purchasing Managers Index remaining at 52.3, matching the final reading in October. If so, this would be the 29th 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 index value is expected at 9:00 GMT.
The preliminary services PMI in the Euro area probably dropped to 54.0 in November, according to the median forecast by analysts. In October the final reading of the index was reported at 54.1, down from a preliminary value of 54.2. If market expectations were met, November would be the 30th 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 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 9:00 GMT.
A better-than-expected performance in any of the PMI readings would have a moderate bullish effect on the common currency.
United States
Manufacturing PMI by Markit – preliminary reading
Manufacturing activity in the United States probably slowed down in November, with the corresponding preliminary Purchasing Managers Index coming in at a reading of 52.9, according to market expectations. If so, this would be the lowest reading since October 2013, when the PMI was reported at 51.8. In October the final seasonally adjusted PMI stood at 54.1, improving from a preliminary 54.0.
According to Markits statement: ”New export sales continued to rise at only a modest pace in October, with survey respondents noting that the strong U.S. dollar remained a headwind to growth. Nonetheless, the latest rise in new work from abroad was the third in the past four months, and the fastest since September 2014.”
”Despite rising levels of incoming new work and an upturn in job creation, manufacturers remained relatively cautious in terms of their inventories of finished goods. Reflecting this, post-production stocks were lowered for the third month running and at the fastest pace since June 2014. At the same time, manufacturers sought to boost their stocks of purchases during October, with some citing expectations of rising workloads in the months ahead. Although only modest, the latest increase in pre-production inventories was the sharpest for almost a year.”
”Manufacturers continued to benefit from falling commodity prices in October, with survey respondents widely commenting on reduced costs for steel and other metals. Measured overall, the latest fall in average cost burdens was the fastest since March. Meanwhile, manufacturers indicated that their factory gate charges rose only fractionally, with the rate of inflation the second-slowest for over three years.”
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 14:45 GMT.
Existing home sales
The index of existing home sales in the United States probably fell 1.98% to a level of 5.44 million in October compared to September, according to the median estimate by experts. In September sales were 4.7% higher from a month ago to reach 5.55 million, or the highest level since May 2010, when a figure of 5.66 million was reported. September sales were boosted by a 5.3% surge in sales of single-family houses. At the same time, sales of condos remained flat during the period. The median sale price climbed 6.1% in September compared to the same month a year ago.
In case the index dropped at a steeper monthly rate than anticipated, this would have a limited bearish effect on the US dollar. The National Association of Realtors (NAR) is to release the official figure at 15:00 GMT.
Correlation with other Majors
Taking into account the week ended on November 22nd and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:
EUR/USD to GBP/USD (0.7785, or strong)
EUR/USD to NZD/USD (0.4377, or moderate)
EUR/USD to AUD/USD (0.1321, or weak)
EUR/USD to USD/JPY (-0.5258, or strong)
EUR/USD to USD/CHF (-0.5459, or strong)
EUR/USD to USD/CAD (-0.6598, or strong)
1. During the examined period EUR/USD moved strongly in one and the same direction with GBP/USD, while moving strongly in the opposite direction compared to USD/JPY, USD/CHF and USD/CAD.
2. The correlation between EUR/USD and AUD/USD was insignificant during the past week.
Bond Yield Spread
The yield on German 2-year government bonds went as high as -0.373% on November 20th, after which it closed at -0.386% to lose 1.9 basis point (0.019 percentage point) in comparison with November 19th. It has been the seventh drop in the past ten trading days and also a second consecutive one.
The yield on US 2-year government bonds climbed as high as 0.921% on November 20th, or the highest level since November 6th (0.958%), after which it closed at the exact same level to add 2.9 basis points (0.029 percentage point) compared to November 19th. It has been the fifth consecutive trading day of gains.
The spread between 2-year US and 2-year German bond yields, which reflects the flow of funds in a short term, widened to 1.307% on November 20th from 1.259% on November 19th. The November 20th yield spread has been the largest one in more than six months.
Meanwhile, the yield on German 10-year government bonds soared as high as 0.500% on November 20th, after which it slid to 0.479% at the close to lose 0.001 percentage point compared to November 19th. It has been the tenth consecutive trading day of decline.
The yield on US 10-year government bonds climbed as high as 2.266% on November 20th, after which it slipped to 2.264% at the close to add 1.7 basis points (0.017 percentage point) compared to November 19th. It has been the fourth gain in the past ten trading days.
The spread between 10-year US and 10-year German bond yields widened to 1.785% on November 20th from 1.767% on November 19th. The November 20th yield difference has been the highest one in more than six months.
Daily and Weekly Pivot Levels
By employing the Camarilla calculation method, the daily pivot levels for EUR/USD are presented as follows:
R1 – 1.0656
R2 – 1.0667
R3 (range resistance) – 1.0675
R4 (range breakout) – 1.0705
S1 – 1.0636
S2 – 1.0626
S3 (range support) – 1.0617
S4 (range breakout) – 1.0587
By using the traditional method of calculation, the weekly pivot levels for EUR/USD are presented as follows:
Central Pivot Point – 1.0681
R1 – 1.0746
R2 – 1.0847
R3 – 1.0912
S1 – 1.0580
S2 – 1.0515
S3 – 1.0414
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