Factory PMI's Driving The EUR/USD Market
Binary options traders in the EUR/USD pair had the perfect opportunity to trade the news today, but let’s summarize first what happened to the price action. The pair opened the U.S session around $1.2995 and after better than expected PMI numbers out of Europe it was going steady all morning long.
ISM manufacturing coming in at its worst level since June 2009
Once the US was on the way the pair rebounded again towards the highs set in the EU session. Offers at 1.3014 capped and aggressive selling kicked in. The single currency was sold across the board and reached levels around 1.2956 on reported aggressive hedge fund selling in the EUR/GBP pair.
What happened next was beyond any expectations - The US data came out with the release of the ISM manufacturing coming in at its worst level since June 2009 bringing a complete reversal in the day’s trend.
The Euro spiked up back to the 1.30’s and following a break of stops around 1.3015 it queezed the rate higher as the London desks headed for the exits. When the USDJPY dell through the Euro followed by breaking through the European high around 1.3040, resulting in another spike to to $1.3108.
As Atlanta Fed President Dennis Lockhart aired on the wires that he would favor tapering Quantitative Easing in Aug/Sept the USD was helped to recover across the board and the EUR/USD dipped to $1.3077, the pair then traded in a $1.3080/$1.3103 range for the remainder of the session before dipping to $1.3070 as the Greenback rallied across the wide spectrum.
Looking at the charts at this point in time we can clearly see support levels around 1.3060 and 1.3040, which were previous resistances. We favor buying calls when these support levels are approached at this point in time, especially should the rate reach the latter level around 1.3040.
A break below 1.3020 should revive pressure to the downside though. On the upside first target is the daily high at 1.3106-7, followed by an extension at 1.3250 which was the daily high in the beginning of May.
To recap the fundamental news here is what we got from the Eurozone - the downturn in manufacturing has slowed down markedly, however it did remain widespread. Falling prices for factories' goods failed to bring in new business, as there was a decent improvement in the surveys for the 17-nation bloc’s biggest four economies.
The Eurozone Manufacturing PMI rose to 48.3 – almost 2 points from April’s level and half a point better than the preliminary reading at 47.8. This is the highest reading since February 2012 and is the first rebound in the numbers in four months with 22 months now being spent in contraction territory below 50.
The output measure has risen to a 15-month high of 48.8 from 46.5. The German PMI number was still below 50 but it did show improvement and it France showed similar sentiment.
Spanish and Italian factories reported better numbers too, but there was a salty part to the report - companies cut their prices again in May with the output price index falling to 47.6 from April's 47.9 – the lowest level since 2010 and at the same time new orders index was above the breakeven mark, signaling that next month's PMI will see little improvement.