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. 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 returns to growth – EUR/USD bounces up

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

Published on Thursday  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 be an indication of the health of the economy.

Manufacturing  PMI  dipped to 50.3 points last month, down  from 52.0 points. This also missed the estimate of 51.3 points. The estimate for the September reading is 49.6 points, which would signify contraction in the manufacturing sector for the first time in over a year. If the indicator does fall below the 50-point level, we could see the euro lose ground.

Sentiments and levels

Europe  looks  to be in terrible shape, based on forecasts , key indicators the inability of the ECB to provide tangible improvement. In addition, the debt crisis seems to be creeping back.  Recent statements out of the Fed show that it is also very concerned about the Eurozone economy and the sluggish euro.  While US data continues looking good and the option of continuing QE instead of ending it still seems remote, the long term now meets a strong correction. After the pair rose from the ashes, it could pause to look for a new direction. This pause doesn’t mean no movement: volatility is here to stay, so traders should proceed with caution. So, the overall sentiment is  neutral on EUR/USD towards this release.

Technical levels, from top to bottom: 1.2750, 1.27, 1.3660 and 1.2570.

 

5 Scenarios

• Within expectations: 46.0 to 53.0: In such a case, EUR/USD is likely to rise within range, with a small chance of breaking higher.
• Above expectations:53.1 to 57.0: An unexpected higher reading can send the pair  above one  support line.
• Well above expectations: Above 57.1: Such an outcome  could result in the  pair breaking  past  a second support line.
• Below expectations: 46.0 to 53.0: A  weak reading could lead to  EUR/USD  dropping below  one support  line.
• Well below expectations:  Below 46.0: In this scenario, the pair could push below a second support level.

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

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