EUR/USD Daily Forecast – Euro Retreats After Weak Manufacturing DataEUR/USD has wiped out early day gains as manufacturing PMI data came in worse than expected.
EUR/USD Volatility Likely to Slow
Last week was an eventful one. The Conservative party secured a majority in the UK election and a major step forward was made in the US-China trade war. It resulted in a rise of volatility in EUR/USD which had been trading in unusually small ranges for the three weeks prior.
But the volatility might not be here to stay. With only two weeks left in the year, investors may start drifting into holiday mode which could see EUR/USD return to tight ranges.
Further, the economic calendar is quite light for the week ahead. Manufacturing and Services data were released shortly after the European open, but aside from that, there aren’t any market-moving reports scheduled this week.
Manufacturing data for the month thus far fell short of expectations. The purchasing manager’s index declined to 45.9 for the Eurozone versus an analyst estimate of 47.3. Besides the first reading of the year, this data has shown a contraction for every month in 2019.
The services sector fared a bit better, rebounding to a four-month high at 52.4 to beat out analyst expectations. Nevertheless, IHS Markit who releases the report indicated it was the worse quarter in six years when taking into account a composite of both the services and manufacturing figures.
The rally in EUR/USD stopped short last week at some fairly important resistance. on a weekly chart, the 50 moving average came into play. On a daily chart, a horizontal level at 1.1179 proved to be a hurdle yet again. The same level had held the pair lower in October and early November.
There is some support within proximity. It comes from a rising trendline that originates from the low printed late last month. There is further support in the 1.1092 to 1.1100 level which buyers may try and defend.
EUR/USD reversed near the 1.1150 level in the early day after Eurozone manufacturing data showed continued weakness.
Volatility may slow in the week ahead with geopolitical events behind us and a light economic calendar.