EUR/USD: Coronavirus vs Manufacturing PMI's

EUR/USD is trending lower on Monday as coronavirus fears overshadow tentative signs of recovery in eurozone and German manufacturing sector.

FOREX 10

EUR/USD is trending lower on Monday as coronavirus fears overshadow tentative signs of recovery in eurozone and German manufacturing sector.

  • EZ manufacturing PMI 47.9 vs 47.8 exp.
  • German manufacturing 45.3 vs 45.2 exp.
Eurozone manufacturing activity contracted again in January but did so at its slowest rate since summer 2019, suggesting that the worst could be over for the bloc’s battered manufacturing sector. Within the closely watched PMI report, forward looking components such as new orders, employment and quantity of purchases all improved

Manufacturing across the Eurozone, but most predominantly in Germany, Europe’s largest economy had been hit hard by the US – China trade dispute and slowing trade. The signing of the first phase trade deal between US and China appears to be lifting confidence which is slowly filtering through to stronger global trade and the manufacturing sector.

The data comes following disappointing German retail sales on Friday which showed a decline of -3.3% month on month, despite consumer confidence picking up. The German economy is by no means out of the woods, but there are some signs of green shoots of recovery. 

Coronavirus impact remains unclear

However, investors are unable to get too excited here as Germany is expected to see its exports weaken once again, but this time owing to coronavirus. The outbreak in China, Germany’s largest trading partner has disrupted business there with a significant economic impact expected, which is bound to negatively affect German exports.

The dollar started the week higher boosted by safe haven flows amid ongoing concerns surrounding coronavirus. The number of official cases has risen to 17,000 with 360 deaths, including one outside of China. 

US data has underwhelmed recently with downbeat consumer spending and inflation. Today traders will look towards US ISM manufacturing figures, which are expected to show a recovery in the sector from its 477.2 level in December.

Levels to watch:

EUR/USD has fallen below 200 & 100 sma on 4-hour chart, although remains above 50 sma. 

The 50 sma offers near term support at $1.1040, a breakthrough here could open the doors to $1.0992, the low for 2020 year to date.
On the flip side, resistance can be seen at $1.11 (round number, high 31st Jan), prior to $1.1120 (high 21st Jan) and $1.1174 (high 16th Jan).



From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.