The EURUSD is dropping for three consecutive days, the largest consecutive decline since early September. German industrial production may lack estimates. The weakness of the data will likely lead to stronger selling pressure. Here is the EURUSD Fundamental Analysis for 07th November 2019.
07 November 2019, AtoZMarkets – EURUSD recorded the longest series of daily losses in two months ahead of the German data, which should show that manufacturing activity contracted in September. The currency pair closed down 0.10% on Wednesday after falling 0.33% and 0.48% respectively Monday and Tuesday. The three-day losing streak is the longest as the beginning of September. At the time, the pair had fallen for six consecutive days until September 2nd. At the time of going to press, the pair is trading at 1.1059, a drop of 0.06% on the day. In simple terms, the pair is on the defensive in anticipation of a release of key macroeconomic data.
EURUSD Fundamental Analysis – 07 November 2019
Data expected at 07:00 GMT is likely to show that industrial production fell 0.4% month-on-month in seasonally adjusted data in September. The annualized figure should print -2.9% against -4% in August. The recession in the German manufacturing sector worsened in September, with the IHS Markit Purchasing Managers Index (PMI) falling to 41.7 in September to reach its lowest level since 2009.
As a result, the probability of industrial production missing estimates is high. This would strengthen the bearish technical configuration, which could lead to greater losses in the common currency. A sharp drop in expectations could bode well for the euro. However, a strong close above 1.1073 is needed to invalidate the downtrend.
US-China Failed Trade Talks
EURUSD remains firmly in the bottom half of the five-year range. But the euro trade-weighted is only about 1% lower than five years ago, when the ECB stepped up its policies to weaken its currency.
EUR CNY rate is higher than it was five years ago. This higher EURCNY rate considerably limits the upside potential of the EURUSD, unless the USDCNY falls back. Last week, the euro failed to pass its 200-day average, nor any other technical/psychological barrier, but the decline in the USDCNY provides downside support for the euro.
However, if a trade agreement between the United States and China results in a narrowing of the USDCNY trade range, it will also limit the possible range for the EURUSD in the future. Meanwhile, the EURUSD is a possibility to buy if it can break 1.12, and a sale if the US China trade negotiations fail.
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