German PMIs both exceeded expectations and the French services PMI returned to growth territory. Together with a big drop in Spanish unemployment, EUR/USD is bouncing back up from the very low levels it fell to earlier nicely, finally staging a bounce that cannot be described as a “dead cat bounceâ€.
Has EUR/USD bottomed out?
Update: here is an explanation about the formation of a hammer pattern on the EUR/USD daily chart.
The data
- France: Markit’s flash services PMI for France surprised by rising from 48.2 to 50.4 points, back to growth territory, above 50 points. Manufacturing PMI for July dropped from 48.2 to 47.6 points, but this is the last disappointment in today’s data.
- Germany: German manufacturing PMI edge up from 52 to 52.9, a bit above 52.2 expected. A stronger rise was seen in the services sector: from 54.6 to 56.6 in Europe’s largest economy. For those looking at the euro as a proxy of the old Deutschmark, this is positive news.
- Spain reported a big drop in its unemployment rate: from 25.9% to 24.5% contrary to a steady figure. This is good news for the euro-zone’s fourth largest economy, but as the absolute numbers suggest, the path is long.
We still have the flash PMIs for the whole euro-zone, but after the German and French data had their impact, a better number is already priced in.
The chart
EUR/USD is currently trading at 1.3470 after reaching a bottom of 1.3437 earlier in the day.
The recent pattern of the pair was a drop, a steady trade without any significant recovery and then another fall. This bounce looks different as it comes just after a fall, and the rise exceeds the previous levels.
A hammer pattern. For more, see the EURUSD forecast.
