EUR/USD: Trading the German Flash Manufacturing PMI

German Flash Manufacturing PMI (Purchasing Manager Index) is  based on a survey of purchasing managers in the manufacturing sector. Respondents are surveyed for their view of the economy and business conditions. A reading which is higher than expected is bullish for the euro.

Update:  German manufacturing PMI at 51.6 as expected

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Friday  at 7:30 GMT.

Indicator Background

Market analysts are always interested in the views of purchase managers on the economy, as the latter are considered to be attuned to the latest economic and financial developments, and their expectations could  reflect the health of the economy.

Manufacturing  PMI  dipped to 52.5 points in September, down  from 53.2 points. Still, this figure was within expectations. This also missed the estimate of 51.3 points. The estimate for the October reading is 51.8 points, which would signify slight expansion in the manufacturing sector.

Sentiments and levels

There is a strong expectation that the ECB will take action  and not allow the euro to rise too high. We will probably see a repeat of this on center stage: the  ECB rate decision. Even if the US is moving away from a rate hike in 2015, the euro-zone is in worse shape, and  we can  expect  this disparity  to be reflected in the exchange rate. So, the overall sentiment is  bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.15, 1.1460, 1.1373, 1.13, 1.1215  and 1.1050.

5 Scenarios

• Within expectations: 49.0 to 55.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
• Above expectations: 55.1 to 59.0: An unexpected higher reading can send the pair  above one  resistance line.
• Well above expectations: Above 59.1: Such an outcome  could result in the  pair breaking  above a  second  resistance line.
• Below expectations: 45.0 to 48.9: A  weak reading could lead to  EUR/USD  dropping below  one support  line.
• Well below expectations:  Below 45.0: In this scenario, the pair could push below a second support level.

For more about the EUR, see the EUR/USD forecast.