EUR/USD Daily Technical Analysis for November 2, 2017

The EUR/USD edged lower on Wednesday and continued to hover near the 1.1630 level, as solid private job gains and robust manufacturing figures weighed on the currency pair. U.S. yields moved higher allowing the dollar to gain a foothold as the Fed kept rates unchanged but upgraded the economy.

Technicals

The EUR/USD continues to form a head and shoulder reversal pattern, after breaking through the neckline near the 1.670 level, which is seen as short-term resistance. The exchange rate is also forming a bear flag pattern that is a pause that refreshes lower. Support is seen near the 1.1600 level and then the July lows at 1.1329. Momentum has turned negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal.

ISM Manufacturing Beat Expectations

The Institute of Supply management reported that its manufacturing index hits 58.7 in October, slightly better than the 58.6 expected from economists. That represents a decline from September’s 59.8, which was the highest reading for the service sector index since August 2005. Meanwhile, the September, investment on private construction projects fell 0.4% after slipping 0.1% in August. It was the third straight monthly drop in private construction outlays and reflected a 0.8% decline in spending on private nonresidential projects. Spending on nonresidential projects in September was the lowest since April 2016.

Private Payrolls Were Stronger than Expected

U.S. ADP private payrolls increased 235k in October after a revised 110k September gain, with ongoing hurricane noise in the data. The goods sector added 85k jobs, including 62k in construction and 22 in manufacturing. Services added 150k. Leisure jobs increased 45k.

The Mortgage Market Contracted

U.S. MBA mortgage market index sank 2.6%, in addition to a 0.8% dip in the purchase index and 4.5% decline in the refinancing index for the week ended October 27. The average 30-year mortgage rate nudged up 4 basis points to 4.22% as budgets cleared the House and Senate and set up a potential deal on tax cuts, which lifted stocks to fresh record highs.

UK October Manufacturing PMI Beat Expectations

The UK October manufacturing PMI beat expectations, rising to a 56.3 headline reading, up from 56.0 in September. The median forecast had been for a 55.8 outcome. The survey highlighted that production and new order volumes continued to rise at a robust pace, with the domestic market strong and new export business rising. While sterling weakness since the Brexit vote last year improved competitiveness in export markets, a recent rebound has eroded some of this benefit, while the report also showed that the rates of inflation in input costs and output charges are accelerating at rates well above historical series averages.

Chinese PMI  Data Disappoints

China reported that its official manufacturing Purchasing Managers’ Index for the month of October came in at 51.6 missing expectations. Expectations were for the world’s second largest economy to post official PMI of 52.0 for October, down from 52.4 in September. Both production and demand fell in October due to week-long public holidays and a slowdown in industries that were cutting excess capacity and pollution, the bureau added in a separate statement. Official services PMI meanwhile fell to 54.3 in October from 55.4 in September, the National Bureau of Statistics reported.

Japanese manufacturing activity in October slowed less than initially thought. The final Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) was 52.8, above the preliminary reading of 52.5 and just below September’s final reading of 52.9. The index remained above the 50 threshold that for the 14th consecutive month. The output component of the PMI index was a final 53.3, above a preliminary a 52.6 and above a final 53.2 in September.