Euro rally fades ahead of the flash manufacturing PMI data
May 21, 2020
Posted by: Analysis Team
Category: FOREX, Technical Analysis
The price of crude oil rose after data from the US showed that inventories were falling. According to the Energy Information Administration (EIA), the number of inventories declined by more than 4.9 million barrels in the previous week. This was the biggest drawdown since March. Analysts were expecting the inventories to rise by 1.1 million barrels. The Cushing crude oil inventories fell by more than 5.5 million barrels while weekly distillate stocks rose by more than 3.8 million. These numbers show that demand for oil is creeping back in the United States as more people start going back to work.
The US dollar strengthened slightly after the Federal Reserve released its minutes for the previous meeting. In the minutes, the Fed officials said that the disease was posing a severe threat to the economy. They also agreed that the effects of the pandemic created an extraordinary amount of uncertainty and considerable risks to the market. In the meeting, they left interest rates unchanged near zero and boosted the pace of asset purchases. In his testimony on Tuesday, Jerome Powell said that the bank would do whatever it took to cushion the US economy from the current pandemic.
The focus today will be on the flash manufacturing PMI data that will be released by Markit. Analysts expect the data to show that manufacturing and service activity contracts. But, they expect that activity will show some improvement in May. For example, they expect the German manufacturing PMI to jump from the previous 34.5 to 39.2. In the eurozone, they expect it to improve from the previous 33.4 to 38.0. Other top news will be the Turkish interest rate decision, the US jobless claims, the Philadelphia Fed manufacturing index, and the US existing home sales data.
The XBR/USD rose to an intraday high of 36.50, which is the highest it has been since April 7. On the four-hour chart, the price is above the 25-day and 50-day exponential moving averages. It is also slightly above the 38.2% Fibonacci Retracement and above the bullish pennant pattern. The pair may continue rising as bulls attempt to test the 50% retracement at 39.38.
The EUR/USD pair dropped from the previous high of 1.0998 to a low of 1.0956. On the hourly chart, the price is slightly below the 25-day exponential moving average and above the 61.8% Fibonacci Retracement level. Also, the price formed a bearish engulfing pattern yesterday and is below the important support of 1.0975. Therefore, the pair may continue falling ahead of the manufacturing PMI and US jobless claims data.
The AUD/USD pair dropped to an intraday low of 0.6553 as the Australia and China trade war continued. On the hourly chart, the price has just crossed the 25-day exponential moving average while the RSI has fallen. At the same time, the price has entered the Ichimoku cloud. This means that the price will likely continue falling as bears target the lower side of the cloud, which is also the important support of 0.6500.