German factory orders overview
The German data, scheduled for release at 06:00 GMT, is expected to show the factory orders in Eurozone’s manufacturing powerhouse fell at a seasonally adjusted rate of 0.1% month-on-month in May, having increased by 0.3% in April.
In annualized terms, factory orders are forecasted to drop 5.7% in May, following a 5.3% slide in the previous month.
Manufacturing activity contracted in May
IHS Markit’s flash Purchasing Managers’ Index for manufacturing dropped to 44.3 in May from 44.4 in April. That was the fifth below-50 (contraction) monthly reading in a row.
More importantly, both new orders and export sales were down, courtesy of Brexit uncertainties and trade tensions.
As a result, the probability of factory orders printing below estimates is high.
Impact on EUR/USD
A weaker-than-expected data will likely bolster fears of deeper economic slowdown in the Eurozone’s biggest economy and reinforce expectations of European Central Bank rate cuts, sending the EUR/USD lower toward the 100-day moving average (MA) support, currently at 1.1260.
The currency pair is currently trading largely unchanged on the day at 1.1284, having faced rejections above 1.13 earlier this week.
The spot may rise above the psychological resistance if German factory orders blow past expectations.
About German factory orders
The Factory orders released by the Deutsche Bundesbank is an indicator that includes shipments, inventories, and new and unfilled orders. An increase in the factory order total may indicate an expansion in the German economy and could be an inflationary factor. It is worth noting that the German Factory barely influences, either positively or negatively, the total Eurozone GDP. A high reading is positive (or bullish) for the EUR, while a low reading is negative.
Technical Levels
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