Euro traders rejoiced earlier today after manufacturing and services updates from the bloc showcased a possible end of the long-lasting tarnishing trend and signalled that brighter days may lie ahead.
Services activity appears to be at the early stages of escaping long periods of stagnation or mild contraction and instead return to expansion, as the latest PMI reading crossed its highest level in 9 months and businesses reported constructive outlook for the months ahead, albeit the persistently weak external demand. The return to growth on the services front appears to have come from Germany, whereas French activity dragged.
Manufacturing activity however was the eye catcher, as the latest PMI reading after crossing into expansion territory for the first time in over 3 years in August, it slipped back into contraction, renewing worries for the continuation of the downtrend of the sector. New orders dragged and output growth showed marginal progress. Analysts, nevertheless, expect the bloc’s manufacturing capabilities to quickly rebound in the coming months and find support from increased production, output and new orders expectations.
The Euro dipped slightly below the $1.18 level post the mixed PMI data, but also the ongoing fiscal concerns in France, political uncertainty in Germany, but also the raging Russia-Ukraine war at the eastern flank of the Union. To say the least, for growth to be faster and hopefully last longer, Europe will have to make substantial reforms and changes in their playbooks and clean up the yard in front of their courthouse.
Technical Analysis
EURUSD Chart – Euro sticks close to the $1.1800 area after PMI data
Resistance: 1.1830 (R1), 1.1920 (R2), 1.2000 (R3)
Support: 1.1730 (S1), 1.1650 (S2), 1.1580 (S3)