Forex traders received another dose of negative economic news out of the Eurozone during the morning trading session. Many worry that the Eurozone may enter a triple dip recession which means a third consecutive recession and pressure on the European Central Bank to act on a wider stimulus have grown over recent weeks. Today’s main focus was on the release of the Eurozone Composite PMI, Manufacturing PMI as well as the Services PMI for November.
Economic data released earlier during the week out of the Eurozone surprised to the upside and came in better than expected. This allowed the Euro to rally from extreme oversold territory and lifted the EURUSD by over 200 pips. Bearish momentum was wiped out and replaced by bullish momentum as the EURUSD created higher highs and higher lows. This supported the overall move to the upside and the technical picture supported a continuation of the rally.
Today’s economic disappointment has stopped the advance. Economists expected the Eurozone Composite PMI to rise to 52.3 in November as compared to the level of 52.1 reported in November. The actual figure showed a slowdown to 51.4. France continued to contract and the Composite PMI was reported at 48.4. The German economy slowed down as well as the Composite PMI was reported at 52.1 and marginally avoiding a contraction of its own. The positive takeaway should be the fact that the overall Eurozone PMI remained in expansion territory.
The Eurozone Manufacturing PMI was expected to increase to 50.8 in November from October’s level of 50.6 and the Services PMI was called higher by 0.1 points to 52.4 in November from October’s 52.3. France reported its Manufacturing PMI at 47.6 and its Services PMI at 48.4. Germany reported its Manufacturing PMI at 50.0 and its Services PMI at 52.1. France continued to contract while Germany slowed down to a near contraction.
Despite the slowdown in the Eurozone Composite PMI, Manufacturing PMI and Services PMI the Euro remained stronger than expected and after an initial drop in the EURUSD it managed to rebound. Forex traders should be cautious with the EURUSD, but given the change in momentum forex traders are advised to seek long opportunities during corrections. Volatility should be expected to increase as more economic data will interfere with the technical image. From a technical point of view the EURUSD is expected to resume its rally.