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German/ Eurozone flash PMIs Overview

Amongst the Euro area economies, the German and the composite Eurozone PMI reports hold more relevance, in terms of its impact on the European currency and the markets as well.

The forecast for the Eurozone flash manufacturing PMI shows 56.0 for May, lower than previous month’s reading of 56.2, and the Eurozone services sector is also expected to come in a tad weaker at 54.6 in the reported month versus 54.7 booked in April.

The flash manufacturing PMI for Germany is also expected to drop to 57.8 when compared to the final 58.1 result booked previously. While the index for the services sector is seen unchanged at 53.0 in May.

How could they affect EUR/USD?

An upside surprise in the manufacturing PMI readings could offer a helping hand to the EUR bull to take on the EUR/USD recovery towards the 1.1785-90 resistance area, above which the momentum could accelerate towards 1.1825/29  (May 18 and 22 highs). A sustained break above the last could open doors for a test of the 1.19 handle.

On the flip side, if the readings show a big-than expected drop, the spot could change course and test the 1.1750 support, below which the test of half-yearly lows at 1.1717 will be inevitable.

Key Notes

EUR/USD: Corrective rally remains elusive, focus on preliminary PMIs and Fed minutes

Eurozone: Composite PMI likely to climb to 55.3 in May – Nomura

EUR/USD Forecast: break below 1.1700 support to open room for additional weakness

About German/ Eurozone flash PMIs

The Manufacturing Purchasing Managers Index (PMI) released by the  Markit Economics  captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the Euro Zone. Usually, a result above 50 signals is bullish for the EUR, whereas a result below 50 is seen as bearish.