EUR/USD - Focus on ISM PMI, US-German yield spread contradicts rally

The EUR/USD rose above 1.19 handle and in the process left another higher low on the daily chart as the Eurozone employment and inflation numbers showed the 17-nation currency bloc is moving in the right direction.

Focus on PMIs

Kathy Lien from BK Asset Management writes, " Revisions to November PMIs are due for release on Friday.  It is difficult to predict the direction of any revisions but if changes are made, they could have a near-term impact on the euro." 

In the US session, all eyes would be on the US Nov. ISM manufacturing figure. It is expected to show the pace of expansion in the activity remained largely unchanged. The bid tone around the USD could strengthen if the details of the ISM index show labor market remains strong. Also, the tax bill uncertainty could cap the downside in the EUR/USD.

US-German yield differential contradicts uptick in EUR/USD

• The 10-year US-German yield differential rose to a one-month high of 203.9 basis points yesterday. The widening of the yield spread in the USD positive manner puts a question market on the sustainability of the EUR/USD rally.
• The spread could witness an upside break (move above 204.2 basis points) if the ISM manufacturing PMI betters estimates.

EUR/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes-

"The price is holding just a handful of pips above a bearish 20 SMA, while technical indicators turned south within positive territory, now nearing their mid-lines. The pair is midway of its weekly range, clearly showing the absence of a defined trend. Whereas above 1.1960 or below 1.1790 the outlook will be more defined, seems the market will wait for December Fed and ECB's monetary policy announcements before choosing a side."

Support levels: 1.1860 1.1820 1.1785

Resistance levels: 1.1930 1.1960 1.2000