EUR/USD – Euro steady as German, eurozone manufacturing PMIs match forecasts

EUR/USD has started the week with slight gains. Currently, the pair is trading at 1.1185, up 0.15% on the day. On the release front, German manufacturing PMI ticked lower to 44.3, down from 44.4. The Eurozone indicator dropped from 47.9 to 47.7. Both scores matched the estimates. In the U.S., ISM Manufacturing PMI is expected to rise to 53.0, up from 52.8 in the previous release.

Weak global demand has taken a toll on German and eurozone manufacturing. In Germany, manufacturing PMIs have hovered below the 50-level for five months, while the eurozone indicator has been below 50 for four months. This points to persistent contraction in the manufacturing sector. The trade war between the U.S. and China has dampened demand for German cars, which has hurt the massive German car industry. Unless the U.S.-China trade war shows signs of being resolved, the weak manufacturing sectors is likely to continue.

The U.S. economy continues to perform well, with first-quarter growth above the 3% level. Second estimate GDP posted a gain of 3.1%, matching the estimate. This was just shy of the initial estimate in April, which came in at 3.1%. The U.S. economy is firing on all cylinders, despite the nasty trade war with China, which has escalated in recent weeks. U.S. officials, including President Trump, had announced that substantial progress had been made, and it seemed that a trade deal was just around the corner. However, Trump shocked the markets by slapping further tariffs on China, which led to counter-tariffs against U.S. products. China has reacted angrily to U.S. trade sanctions on Huawei, a giant Chinese telecom company. The euro has managed to weather the latest crisis in the U.S.-China trade war, but if there is no improvement, investors could opt for the safety of the greenback, at the expense of the euro.

Escalating Trade Feuds Keep Markets Nervous

Risk aversion continues into the new month

Dollar direction to be dictated by week’s events

EUR/USD Fundamentals

Monday (June 3)

• 3:15 Spanish Manufacturing PMI. Estimate 51.4. Actual 50.1

• 3:45 Italian Manufacturing PMI. Estimate 48.5. Actual 49.7

• 3:50 French Final Manufacturing PMI. Estimate 50.6. Actual 50.6

• 3:55 German Final Manufacturing PMI. Estimate 44.3. Actual 44.3

• 4:00 Eurozone Final Manufacturing PMI. Estimate 47.7. Actual 47.7

• 9:10 FOMC Member Quarles Speaks

• 9:45 US Final Manufacturing PMI. Estimate 50.8

• 10:00 US ISM Manufacturing PMI. Estimate 53.0

• 10:00 US Construction Spending. Estimate 0.5%

• 10:05 ISM Manufacturing Prices. Estimate 51.5

• All Day – Wards Total Vehicle Sales. Estimate 16.8M

• 13:25 US FOMC Member Bullard Speaks

Tuesday (June 4)

• 5:00 Eurozone CPI Flash Estimate. Estimate 1.4%

• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%

• 5:00 Eurozone Unemployment Rate. Estimate 7.7%

• 9:55 Federal Reserve Chair Jerome Powell Speaks

Open: 1.1169 High: 1.1190 Low: 1.1160 Close: 1.1185

EUR/USD Technical

In the Asian session, EUR/USD posted small gains but then retracted. The pair dipped in European trade but has recovered

• 1.1120 is providing support

• 1.1212 is the next resistance line

• Current range: 1.1120 to 1.1212

Further levels in both directions:

• Below: 1.1120, 1.1046 and 1.0950

• Above: 1.1212, 1.1300, 1.1434 and 1.1553