EUR/USD traded at uptrend support and didn’t know if to break or bounce. The relatively weak Flash PMIs released in Europe gave the pair the extra push: the pair lost uptrend support and fell towards the next support line.
At the time of writing, EUR/USD recovered after falling to 8 pips above support. What are the next moves?
As the daily chart shows, the pair clearly broke below uptrend support that accompanied it since the middle of December. The break below uptrend support is also a break below the support line of 1.3255.
The move sent euro/dollar all the way down to 1.3188, just 8 pips above support at 1.3180. A break of this line opens the door to 1.3130 and 1.31. The 1.3255 line now switches to resistance. For more line and events see the EUR to USD forecast.
PMIs gave the push
Markit released flash (initial, subject to revisions) purchasing managers’ indices in three waves: French manufacturing PMI came out within expectations of 43.9 points: a rise from 42.9 to 43.6 was recorded. However, the services sector figure fell short of predictions of 44.5, and actually fell from 43.6 to 42.7 points. Both figures are deep in contraction zone – below 50 points.
Also in Germany, the manufacturing figure was in line with expectations, but services disappointed: manufacturing rose from 49.8 to 50.1 points, close to 50.4 that was predicted. This marks a return to growth, yet very slow growth. The services sector number dropped from 55.7 to 54.1 points, below 55.5 that was predicted. This is still healthy growth, but not as expected.
For the whole euro-zone, manufacturing scored 47.8, a small drop from 47.9 and below expectations for a rise to 48.4. Services printed a bigger disappointment with a slide from 48.6 to 47.3 instead of a rise to 49.2 that was anticipated. The euro-zone recession will probably continue in Q1 2013 according to these figures.
The next big economic release that is expected to move the pair is the publication of US data at 13:30 GMT. See how to trade the US jobless claims with USD/JPY.Get the 5 most predictable currency pairs