When are the S&P Global's flash US PMIs and how could the data affect EUR/USD?

US PMI Overview

S&P Global will release the flash version of the US Manufacturing and Services PMIs at 13:45 GMT this Monday. The gauge for manufacturing is expected to decline to 51.2 in October from 52.0 in the previous month. The Services PMI, meanwhile, is anticipated to remain in the contraction territory for the fourth successive month and come in at 49.2 for the current month. Moreover, the composite PMI is also expected to show a contraction in the overall business activity and edge down to 49.1 from 49.5 in September.

How Could it Affect EUR/USD?

Ahead of the key release, the US dollar regains strong positive traction on the first day of a new week and exerts some downward pressure on the EUR/USD pair. A stronger US PMI print will reaffirm market bets that the Federal Reserve will stick to its policy-tightening path and provide an additional lift to the buck. Conversely, weaker US macro data will add to worries about a deeper global economic downturn and continue to benefit the greenback's relative safe-haven status.

The fundamental backdrop suggests that the path of least resistance for the EUR/USD pair is to the downside. That said, any immediate market reaction is more likely to remain limited amid expectations that the European Central Bank will deliver another supersized 75 bps rate hike at its upcoming policy meeting on Thursday. This, in turn, warrants some caution for aggressive traders and before positioning for a firm near-term direction.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for the EUR/USD pair and writes: “The Relative Strength Index (RSI) indicator on the four-hour chart holds above 50 despite the latest decline, suggesting that sellers remain hesitant for the time being. On the downside, 0.9800 (Fibonacci 38.2% retracement of the latest downtrend, 20-period SMA, 50-period SMA, 100-period SMA) aligns as key support. With a four-hour close below that level, the pair could come under technical bearish pressure and decline toward 0.9750 (Fibonacci 23.6% retracement) and 0.9700 (psychological level, static level).”

Eren also outlines important technical levels to trade the EUR/USD pair: “On the upside, the 0.9840/50 area, where the Fibonacci 50% retracement and the 200-period SMA are located, forms stiff resistance. If buyers manage to flip that level into support, 0.9900 (daily high, psychological level) and 0.9930 (static level) could be targeted.”

Key Notes

  •  EUR/USD Forecast: Euro closes in on key support area

  •  EUR/USD Price Analysis: Decent contention appears around 0.9700

  •  EUR/USD: Unlikely to push ahead, 0.9950 is significant resistance – ING

About the US Manufacturing PMI

The Manufacturing Purchasing Managers Index (PMI) released by the Markit Economics captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States. Readings above 50 imply the economy is expanding, making investors understood it as a bullish for the USD, whereas a result below 50 points for an economic contraction, and weighs negatively on the currency.

About the US ISM Services PMI

The Services Purchasing Managers Index (PMI) released by Markit Economics captures business conditions in the services sector. As the services sector dominates a large part of total GDP, the services PMI is an important indicator of the overall economic condition in US. A result above 50 signals is bullish for the USD, whereas a result below 50 is seen as bearish.