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.


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).

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.