Manufacturing activity in the Euro zone rose markedly in the last month of 2016, a private survey showed on Monday. IHS Markit reported its final Purchasing Managers' Index for the region's manufacturing sector advanced to 54.9 points in December, unchanged from the preliminary reading and up from November's 53.7. The December figure was the highest since April 2011. Furthermore, the survey revealed that the PMI Output Index increased to 56.1, its 32-month high, from the previous month's 54.1 points. Moreover, despite the fastest growth in prices in more than five years, the New Orders Index accelerated to 55.9 last month, hitting its highest level since April 2011 and surpassing November's 54.4. Last month, the European Central Bank prolonged its QE program until the end of 2017, lowering its 80 billion euros monthly asset purchases to 60 billion euros. Separately, Markit said the final PMI Index for the German manufacturing sector climbed to 55.6 points, a 35-month high, after posting 54.3 in November. The results pointed to considerable improvements in both domestic and overseas demand. The German economy grew 0.2% in the Q3 of 2016, after expanding 0.7% and 0.4% in the Q1 and Q2, respectively. However, should have supposedly rebounded in the Q4 of 2016.
Americans became more optimistic about the economy in December since the postelection bump in confidence continues. As data suggest the US consumer confidence reached its highest in more than 15 years during the previous week as Americans expect more strength ahead in business conditions, stock prices and the job market following the election of Donald Trump as president in November. According to the Conference Board the Consumer Confidence Index advanced to 113.7 in December from an upwardly revised 109.4 in November. Meanwhile, the data topped estimates in a Reuters poll for a reading of 109.0. Another reason for the gain in confidence is surging optimism among older Americans. Economists follow confidence indicators because upbeat consumers are more likely to increase personal spending, which makes up most of the US economy.
Upcoming fundamental releases: German Unemployment Change; ISM Manufacturing PMI
The EUR/USD market is unlikely to experience severe volatility due to fundamental factors during the morning session on Tuesday. The German unemployment change cones out at 8:55 GMT, but is bound to do little to the EUR/USD price due to its medium impact on currency priced. Some more prominent volatility could spill into the market at 3:00 GMT when the ISM manufacturing PMI comes out, in case the data comes out other than expected.
EUR/USD lets senior pattern take over
Daily Chart: EUR/USD completed the retracement it had been attempting on Monday, posting a green candle now which is somewhat consistent with theory, predicting a bullish outburst after the pattern is broken. The pair could close in the green zone but it is rather expected to maintain the short-term southward motion and target the bottom boundary of the inferior pattern which has been sketched for the sole purpose of leading the rate north. Resistance currently lies at 1.0505 and we would not expect a break above this level today, while the lack of immediate demand areas makes the downside target further away at 1.0386.Bullish sentiment persists
SWFX traders remain long on the pair, as 56% of open positions are long. Meanwhile, 60% of trader set up orders are to sell the Euro.
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade around 1.0506 by April
Traders, who were questioned on their longer-term views on EUR/USD between December 3 and January 3 expect, on average, the currency pair to trade around 1.0506 in early April. In addition, 27% (-1%) of participants believe the exchange rate will be generally above 1.08 in ninety days and 8% (-1%) see it above 1.14. Alongside, 36% (+4%) of those surveyed reckon the pair will trade below 1.02 in three months.