EUR/USD – Euro shrugs off soft investor confidence report

EUR/USD has started the new trading week with a yawn. In the Monday session, the pair is trading at 1.1379, down 0.08% on the day. On the release front, eurozone investor confidence slumped in November, dropping to 8.8 points. Later in the day, the U.S releases ISM Non-Manufacturing PMI, which is expected to drop to 59.3 points. On Tuesday, Germany and the eurozone release services PMIs. As well, Germany releases factory orders and the eurozone will publish PPI. The U.S will release JOLTS Job Openings and all eyes will be on the U.S midterm congressional elections.

The eurozone economy ran into some headwinds in the third quarter, and there are concerns that the slowdown could continue in Q4 as well. The well-respected Sentix investor confidence report fell from 11.4 to 8.8 points, its lowest level since October 2016. The index has dropped sharply in 2018 – the heady days of  January, when the index came in at 32.9, appear long gone.

Is the German manufacturing sector in trouble? Manufacturing slowed for a third straight month in October, as the slowdown has now entered the fourth quarter. The October Manufacturing PMI dipped to  52.2, down from 53.7 points in September. The reading, which points to limited expansion, is the lowest since May 2016. The weak data can be directly attributed to global trade tensions, which have dampened the German export sector. China is Germany’s third largest export market, and a slowdown in China due to U.S trade tariffs could have a chilling effect on the German economy. The German central bank is forecasting zero growth in the third quarter, and growth in the eurozone also softened in the third quarter.

The U.S economy continues to perform well, a fact that will be hammered home by President Trump and the Republicans in the few hours left until Election Day on Tuesday. The labor market is at or beyond capacity, and nonfarm payrolls surged to 250 thousand, crushing the estimate of 194 thousand. Wage growth has also strengthened, with strong gains of 3.1% in the past year. Despite these strong numbers, the dollar failed to make headway on Friday, as reports that President Trump will present his Chinese counterpart with a trade deal proposal increased risk appetite and weighed on the greenback.

Decision Time

Markets in wait and see mode ahead of midterms

EUR/USD Fundamentals

Monday (November 5)

• 3:00 Spanish Unemployment Change. Actual 52.2K
• 4:30 Eurozone Sentix Investor Confidence. Estimate 9.9. Actual 8.8
• 9:45 US Final Services PMI. Estimate 54.7
• 10:00 US ISM Non-Manufacturing PMI. Estimate 59.3
• Tentative – US Loan Officer Survey

Tuesday (November 6)

• 2:00 German Factory Orders. Estimate -0.4%
• 3:55 German Final Services PMI. Estimate 53.6
• 4:00 Eurozone Final Services PMI. Estimate 53.3
• 5:00 Eurozone PPI. Estimate 0.4%
• 10:00 US JOLTS Job Openings
• All Day  – US Congressional Elections

*All release times are DST

*Key events are in bold

EUR/USD for Monday, November 5, 2018

EUR/USD for November 5 at 5:40 EST

Open: 1.1388 High: 1.1400 Low: 1.1377 Close: 1.1379

EUR/USD Technical

EUR/USD has shown limited movement in the Asian and European sessions

• 1.1300 is providing support
• 1.1434 is the next resistance line
• Current range: 1.1300 to 1.1443

Further levels in both directions:

• Below: 1.1300, 1.1212 and 1.1120
• Above: 1.1434, 1.1553, 1.1685 and 1.1800

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