Global macro overview for 23/05/2018

Eurozone PMI data disappoints the global investors, Euro slides further

After disappointing data from Eurozone economies, the common currency is again under the pressure. The PMI data for Germany was worse both than the consensus and previous readings: PMI Services were at the level of 52.1 (versus 53.2 expected and 53.0 prior) and PMI Manufacturing was released at the level of 56.8 (versus 57.9 expected, 58.1 prior). The Composite PMI is, as a result, the lowest since September last year and is 53.1 pts or more than 6 pts below the January peak. The analogy for France is even worse, which fell the lowest since the beginning of last year (54.5 versus 56.6 expected and 56.7 prior).

The PMI data for the whole Eurozone were as well worse than expected. The PMI Manufacturing was released at the level of 55.5, while the global investors expected 56.1 points after 56.2 points a month ago. The PMI Services was worse too, as it was released at the level of 53.9 (versus expected 54.5 and 54.6 prior). Overall the Composite PMI for the Eurozone was lowered to the level of 54.1 points.

A series of weak data from Eurozone is worryingly prolonging, which is increasingly affecting the expectations of the ECB policy and, as a result, the common currency is becoming more and more pressure, so the EUR will likely be depreciating again across the board. Nevertheless, there is no reason to panic as the PMI indices are still above their fifty level which separates the economic expansion from contraction, so the worse than expected data might be just a part of the temporary correction.

Let's now take a look at the EUR/USD technical picture at the H4 time frame after the PMI data were published. The pair dropped towards the technical support at the level of 1.1717 and broke through it. The new local low was made at the level of 1.1698 in oversold market conditions. The nearest resistance is seen at the level of 1.1742 and 1.1749. Please notice the downtrend is now mature and corrective pull-back might occur anytime.

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