The German data scheduled for release at 06:00 GMT is expected to show factory orders, an important indicator for Europe’s biggest economy, fell for the third consecutive month in September.
The gauge is seen falling 6.2% year-on-year, having dropped 6.7% in August. Month-on-month, however, factory orders are forecasted to rise by 0.1%, having dropped by 0.6% in August.
Manufacturing recession deepened in September
IHS Markit’s Purchasing Managers’ Index (PMI) for Germany fell to 41.7 in September to register the lowest reading since 2009 and eighth straight monthly decline in output. The PMI stood at 43.5 in August. A reading below 50 indicates contraction.
Notably, new orders declined even faster, dropping to the greatest extent since April 2009, according to the official report.
If the lead indicator is a guide, the probability of factory orders disappointing expectations is high.
Impact on EUR/USD
EUR/USD is already operating on slippery grounds, having charted a bearish reversal candlestick pattern over the last two days.
Currently, the pair is trading near 1.1073 – the neckline support of a double top pattern on the daily chart.
A weaker-than-expected factory orders data will likely yield a convincing break below 1.1073, opening the doors for a deeper drop to 1.0966 (double top breakdown target as per the measured move method).
The EUR may pick up a bid if key data betters estimate. The technical outlook, however, would turn bullish only above 1.1180.
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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