The EUR/USD is weakening as data releases showed that the European region inflation is slowing to a 5-year low. Oil prices, global growth and concerns about energy prices are all factors that are leading to the decrease of inflation rate.
From a trader’s perspective, these conditions make a good opportunity to trade; as the Forex market is highly volatile and the European Central Bank is expected to start quantitative easing measures sooner than expected, as an urgent act, in order to defend the growth and to stop the threats of deflation.
Bottom line, the EUR is weak vs. the USD. The worldwide worsening conditions, as reflected by the energy prices and the JPY rates, might add further pressure on the euro, dragging it below 1.20. Gold prices are also expected to plunge after Switzerland’s gold referendum results. All these factors seem to be providing a healthy environment for a stronger USD.
Here are the major Resistance (R) & Support (S) levels of the EUR/USD:
S2 1.2354
S1 1.2405
Pivot Point 1.2450
R1 1.2510
R2 1.2598
As for today’s figures, starting with China, the Manufacturing Purchasing Managers Index (PMI) is scheduled for release; providing an early monthly indication of the economic activities in the Chinese manufacturing sector.
Questionnaires are sent monthly to over 700 manufacturing enterprises all over China. The data presented here is compiled from the enterprises responses about their purchasing activities and supply situations.
Actual: 50.3
Forecast: 50.5
Previous: 50.8
A higher than expected reading should be taken as positive for the CNH, while a lower than expected reading should be taken as negative for the CNH.
Moving to Germany, the core engine of Europe, the German Manufacturing Purchasing Managers' Index (PMI) will be released; measuring the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below indicates contraction.
Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of the overall economic performance.
Forecast: 50.0
Previous: 50.0
A higher than expected reading should be taken as positive for the EUR, while a lower than expected reading should be taken as negative for the EUR.
From the UK, the Manufacturing Purchasing Managers' Index (PMI) will be released; measuring the activity level of purchasing managers in the manufacturing sector. A reading above 50 indicates expansion in the sector; below 50 indicates contraction.
Forecast: 53.1
Previous: 53.2
A higher than expected reading should be taken as positive for the GBP, while a lower than expected reading should be taken as negative for the GBP.
Moving to the U.S., the Institute of Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) Report on Business is scheduled for release; based on data compiled from monthly replies to questions asked to purchasing and supply executives in over 400 industrial companies.
For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers Inventories, Employment, and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction and the negative economic direction and the diffusion index.
The resulting single index number is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements and differences attributable to non-moveable holidays.
All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are annually subjected to some relatively minor changes when conditions warrant them.
The PMI is a composite index based on the seasonally adjusted diffusion indices for five of the indicators with varying weights: New Orders: 30%, Production: 25%, Employment: 20%, Supplier Deliveries: 15% and Inventories: 10%.
Forecast: 57.9
Previous: 59.0
A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.
We wish you luck in your trading activities. For any further assistance, please do not hesitate to contact us at analysis@ICMCapital.co.uk
Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance.
Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader.
Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.
Engaging in CFDs or Spot FX carries a high risk to your capital. You should not engage in this form of investing unless you understand the nature of the Transaction you are entering into and the true extent of your exposure to the risk of loss.
Your profit and loss will vary according to the extent of the fluctuations in the price of the underlying markets on which the trade is based.