GBP/USD Unable to Break Resistance Despite Upbeat Manufacturing PMI

Manufacturing PMI in the UK exceeded expectations and rose from 48.6 to 49.8 points. No change was expected.

GBP/USD was able to climb to higher ground and reach 1.5590 but couldn’t make it to 1.56, which served as a support line many times in the past, and now works as resistance.

1.55 serves as support. For more lines, see the GBPUSD forecast.

Markit, that released the report, stated that the UK manufacturing will be “less of a drag” on the UK economy. These words are not so positive. Indeed, a score of 49.8 is still in contraction territory: 50 separates between growth and contraction.

The services sector is the UK’s biggest and it has remained positive in recent months. After suffering a downfall earlier in the year, the pound managed to stabilize and later rise thanks to a better than expected GDP figure: the economy grew by 0.3% in Q1 2013, according to the first release.

Live chart of GBP/USD:

Read More

London’s FTSE 100 extends gains after upbeat PMI report

 London’s FTSE 100 extended gains in quiet trade on Wednesday, after data showed that the contraction in the U.K. manufacturing sector slowed in April.

Trade volumes remained thin, with many markets in Europe closed for the Labor Day holiday.

During European afternoon trade, the FTSE 100 gained 0.7%, after Markit said that its U.K. manufacturing purchasing managers’ index rose to a seasonally adjusted 49.8 from 48.6 in March, just below the 50 level that separates growth from contraction.

Analysts had expected the index to tick down to 48.5.

Miners shrugged off weaker-than-expected manufacturing data out of China to lead gains.

Mining heavyweights BHP Billiton and Rio Tinto added 1.1% and 1.2% apiece, while Antofagasta increased 2.2%.

Official data released earlier showed that China’s manufacturing purchasing managers' index ticked down to 50.6 in April from 50.9 in March.

Market players now looked ahead to the conclusion of the Federal Reserve’s two-day policy meeting later in the day, as investors try to assess the central bank's attitude towards monetary stimulus.

Recent economic data has dampened expectations for an earlier than expected end to the central bank’s asset purchase program after recent Fed minutes showed that policymakers are divided over the benefits of ongoing monetary easing.

Data on Tuesday showed that the Chicago purchasing managers’ index dropped 49.0 in April from 52.4 in March, the lowest level since September 2009.

The dismal data came after a report last week showed that the U.S. economy grew 2.5% in the first quarter, falling short of expectations for 3.0% growth, underlining concerns over the outlook for the economic recovery.

Meanwhile, investors eyed an upcoming ECB policy meeting later in the week, amid growing expectations for an interest rate cut.

Data on Tuesday showed that euro zone unemployment rose to a record in March, while inflation fell more-than-expected in April.

Recent comments by ECB officials have indicated that the bank would consider cutting rates if economic data continued to deteriorate. 

In the U.S., equity markets pointed to a steady open, as traders awaited the outcomes of the Federal Reserve’s policy meeting later in the session.

The Dow Jones Industrial Average futures pointed to a 0.1% gain, S&P 500 futures signaled a 0.1% advance, while the Nasdaq 100 futures indicated a 0.1% rise. 

Later Wednesday, the U.S. was to release data on ADP nonfarm payrolls, while the Institute of Supply Management was to publish its report on manufacturing activity.

-->

Read More

EUR/USD May 1 – Charges Higher Ahead of Fed Meeting

EUR/USD continues to move upwards on Wednesday. The pair was testing the 1.32 line in the European session, as the US dollar continues to weaken. In the US, the markets will be hoping for good news from ADP Non-Farm Employment Change and the ISM Manufacturing PMI. This will be followed by the FOMC Statement at the Federal Reserve Policy Meeting. In Europe, the markets are closed for the May 1 holiday.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar was steady, touching a high of 1.3186 and consolidated at 1.3167. The pair has moved higher in the European session, and is testing the 1.32 line.
• Current range: 1.3050 to 1.3100.

Further levels in both directions: 

• Below:1.3170, 1.3140, 1.31, 1.3050, 1.3000, 1.2960, 1.2880, 1.2805, 1.2750 and 1.27.
• Above: 1.3255, 1.3290, 1.3350 and 1.34.
• 1.3170 is providing weak support. 1.3140 is stronger. 
• 1.3255 is a strong resistance line.

Euro moves higher ahead Fed meeting – click on the graph to enlarge.

EUR/USD Fundamentals

• 12:15 ADP Non-Farm Employment Change. Exp. 154K
• 13:00 US Final Manufacturing PMI. Exp. 52.1 points
• 14:00 US ISM Manufacturing PMI. Exp. 51.0 points.
• 14:00 US Construction Spending. Exp. 0.7%
• 14:00 US ISM Manufacturing Prices. Exp. 52.6 points.
• 14:30 US Crude Oil Inventories. Exp. 1.2M.
• All Day: US Total Vehicle Sales. Exp. 15.2 M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Exp. <0.25%.

For more events and lines, see the Euro to dollar forecast

EUR/USD Sentiment

• Italy forms government: After months of paralysis, Italy has finally formed a government. The deadlock, which had paralyzed the Eurozone’s third largest economy and had kept the markets on edge, was finally broken as Enrico Letta was nominated as prime minister last week. Letta’s Democratic Party does not have a parliamentary majority, so the coalition he has cobbled together may not last for long. Letta, is considered a moderate and is liked within the Eurozone. The new government will be faced with an economy mired in recession and a sour electorate that is fed up with austerity measures. The markets were pleased by the news, and Italian 10-year bonds were down, dropping below 4%. There was further positive news as the Italian Monthly Unemployment Rate beat the forecast.
• US numbers improve: US data has looked sharp, reversing weeks of disappointing key data from the world’s number one economy. On Monday, US Pending Home Sales posted a gain of 1.5%, beating the forecast of 1.1%. The next day, CB Consumer Confidence jumped to 68.1 points, blowing past the estimate of 61.4 points. The markets will be hoping for more good news on Wednesday, as the US releases key employment and manufacturing numbers.
• German Data Mixed: German data looked sluggish last week, and Tuesday’s numbers were mixed. Retail Sales declined 0.3%, below the estimate of 0.2%. Unemployment Change came in at 4 thousand new claims, worse than the estimate of two thousand. On the bright side, there Consumer Climate rose to 6.2 points, beating the estimate of 5.9 points. In order for the Eurozone to stage a recovery, Germany will have to lead the way with improved numbers.
• Will ECB press the trigger and cut rates? The Eurozone seems to be lurching from one crisis to another, as we have seen with the Cyprus bailout mess and the political impasse in Italy. Add to the mix weak economic activity from major economies in the Eurozone, and we could have a recipe for an interest rate cut by the ECB. Speculation that the ECB will take action is growing, as Euro-zone headline CPI fell from 1.7% to 1.2%, significantly below the 1.6% estimation and well off the 2% inflation target. CB does not meet until Thursday, but the growing possibility of an interest rate cut promises to be a hot topic until Thursday.

-->

Read More

Forex - Euro hits 2-month highs against weaker dollar

The euro hit two-month highs against the broadly weaker dollar on Wednesday as recent soft economic data fuelled expectations that the Federal Reserve will maintain its monetary easing program.

EUR/USD hit 1.3222 during European afternoon trade, the pair’s highest since February 25; the pair subsequently consolidated at 1.3218, gaining 0.39%.

The pair was likely to find support at 1.3159, the session low and resistance at 1.3289, the high of February 21.

Investors were awaiting the outcome of the Fed’s latest policy meeting later in the trading day after recent soft economic data saw investors trim back expectations for an earlier-than-expected end to the bank’s asset purchase program.

Data on Tuesday showed that the Chicago purchasing managers’ index slumped to the lowest level since September 2009 in April.

The data came after a report last week showed that the U.S. economy grew 2.5% in the first quarter, falling short of expectations for 3.0% growth.

The euro pushed higher despite growing expectations that the European Central Bank would cut rates at its meeting on Thursday after recent comments by ECB official indicated that the bank would consider adjusting rates if economic data continued to deteriorate.

Data on Tuesday showed that euro zone unemployment rose to a record 12.1% in March, while inflation fell more-than-expected in April.

The euro was higher against the pound and the yen, with EUR/GBPrising 0.13% to 0.8486 and EUR/JPY climbing 0.41% to 128.77.

Trade volumes looked set to remain thin on Wednesday, with many bourses in Europe shut for the Labor Day holiday.

Later Wednesday, the U.S. was to release data on ADP nonfarm payrolls, while the Institute of Supply Management was to publish its report on manufacturing activity.

-->

Read More