EUR/USD Oct. 23 – Bouncing from the lows on German

EUR/USD is bouncing from low ground on stronger than expected German PMIs, after falling earlier on weak French PMIs and extending the slide resulting in a resurgence of the greenback. Can this recovery continue? In the US, we have jobless claims, which hit a 14 year high last month, as well as Markit’s manufacturing PMI.

Here’s a quick update on technicals, fundamentals and sentiment moving the pair.

• Asian session: The pair traded above 1.27, before falling in the European session.
• Current range: 1.2660 to 1.27.

Further levels in both directions:

• Below:  1.2660, 1.26, 1.2570 and 1.25.
• Above: 1.27, 1.2750, 1.28, 1.2850, 1.2920 and 1.30 and 1.31, which is targeted by one bank.
• 1.2750 is key resistance.
• 1.2660 is the limelight.

EUR/USD Fundamentals

• 7:00 French Flash Manufacturing PMI. Exp. 48.6, actual 47.3 points. This hurt the euro.
• 7:00 French Flash Services PMI. Exp. 48.2, actual 48.1 points.
• 7:30 German Flash Manufacturing PMI. Exp. 49.6, actual 51.8 points. This is the turnaround for the euro.
• 7:30 German Flash Services PMI. Exp. 55, actual 54.8 points.
• 12:30 US jobless claims. Exp. 269K.
• 13:00 US HPI. Exp. +0.4%.
• 13:45 US Markit Flash Manufacturing PMI. Exp. 57.2 points.
• 14:00 Euro-zone Consumer confidence. Exp. -12 points.
• 14:00 US CB Leading Index. Exp. +0.8%.

* All times are GMT.

For more events and lines, see the EUR/USD.

EUR/USD Sentiment

• Gap between Germany and France: Worries about Germany have somewhat dissipated with the This is the turnaround for the euro.. However, the situation in France just looks worse. The euro currently likes the German data. If a deal between the countries is indeed struck, this could help build confidence. However, the whole world is looking at euro-zone in worry.
• US inflation and jobs look good: US inflation data came out a bit above expectations, and this gave a boost to the greenback. Towards the FOMC meeting, every job figure carries weight. After claims hit 264K last week, this week’s publication tests if this is a one off.
• ECB to buy corporate bonds?: A report hit the wires on Tuesday saying that the ECB is due to announce buying corporate bonds in December and begin buying them in Q1. While a denial came later on, ECB member Coene basically said it is an option. Buying corporate bonds expands the potential assets that the ECB can buy, thus allowing it to print more euros and faster. This is the main weight on the euro.
• To end QE or not to end QE: What seemed like a done deal is not necessarily so. The usually optimistic and bullish James Bullard suggested that the Fed would not end its QE program in its upcoming meeting but rather continue it due to worries about Europe. This hit the US dollar. Later on, other FOMC members, some of them quite dovish, did reaffirm the end of QE. Markets will probably be nervous towards the October 29th meeting. Inflation numbers will likely have an impact on this decision. See 5 reasons why QE will end.
• Stress tests coming up: The next big event for the euro-zone is the release of the stress test results for banks on Sunday. While the Bank makes an effort to keep it secret, we can expect some leaks. Will some banks fail the tests? This is needed for credibility, but could also cause worries.

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