German Factory Orders overview
The German data scheduled for release at 06:00 GMT is expected to show the pace of decline in the Factory Orders moderated somewhat in August.
Factory Orders are forecasted to drop 1.5% month-on-month in August, following July's 2.7% decline. The annualized figure is expected to print at -4.6%.
Manufacturing PMI remained below 50.00 in August
The headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – rose slightly to 43.5 in August, but remained well below 50, indicating contraction for an eight-month in a row.
More importantly, the survey showed that sentiment about future output fell to a record low, pointing to pessimism among manufacturers.
Factory orders, therefore, may have taken a hit in August as forecasted by economists.
Impact on the EUR/USD
The long upper wicks attached to the previous two daily candles indicate the pair's corrective bounce from Oct. 1's low of 1.0879 has run out of steam near the 21-day moving average (MA).
As of writing, the pair is trading around 1.0980 and the 21-day MA is located at 1.0996. The pair will likely find acceptance above the key MA hurdle, signaling a continuation of the recovery rally if the German Factory Orders blow past expectations.
However, if the Factory Orders drop more than expected, EUR/USD may face selling pressure and drop below 1.0950.
It is worth noting that the probability of a 25 basis points Federal Reserve rate cut on Oct. 30 has moved back higher to 83% at press time. So, the downside in EUR/USD could be limited.
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.
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