EUR/USD: purchasing manager data is hard to read

Buying and selling forces remained very balanced in the very short term for the pair, as the first ever Eurozone PMI (Purchasing Managers' Index) estimates came out half-lean, above the target for industry at 58.4, but below for services (54.6).

Chris Williams, Chief Economist at IHS Markit, comments on the figures, "Growth in Eurozone private sector activity slowed sharply at the start of the fourth quarter, posting its weakest pace since last April. Supply problems have hampered manufacturing output growth to its lowest level since the first confinements in 2020. Meanwhile, in the services sector, the rebound that began in the summer lost momentum as renewed concerns about the virus, particularly in Germany, reverberated through consumer-oriented sectors such as travel, tourism and leisure. The pandemic has also meant continued severe disruptions to supply chains, which have hampered production and continued to push up prices in both the manufacturing and service sectors. Average prices charged for goods and services have risen at a rate not seen for more than two decades, a trend that will undoubtedly be reflected in consumer prices in the coming months. While the rate of growth of activity in the region remains above its long-term average for the time being, the expansion is likely to slow down in the coming months as the pandemic continues to hamper activity and push up prices. After strong increases in the second and third quarters, the trend is towards much weaker GDP growth in the final quarter."

On the statistical front, weekly jobless claims in the US remained below 300,000 new units last week, doing even slightly better than consensus. The Philly Fed's manufacturing index missed expectations at 23.6. The Philly Fed was expected to contract, but at a slower pace.

As a reminder, the day before, in its "Beige Book", a document that provides a periodic picture of the US economy, the central bank stressed that global supply difficulties, as well as labour shortages and concerns about the virus variant, had slowed the growth of economic activity in the United States at the beginning of the autumn. While this report, based on a survey of US businesses conducted between the end of September and the beginning of October, does not a priori call into question the start of the Fed's tapering (reduction in the pace of asset purchases) from next month, it does highlight the tensions that Fed policymakers are facing as they also consider raising rates in the near future.

If the current high inflation persists, the Fed may have to start this process sooner than expected, according to several officials. This was dismissed by Cleveland Fed President Loretta Mester on NBC, who "doesn't think there are any interest rate hikes coming anytime soon". A majority of the 66 economists polled by Reuters gave credence to the latter scenario and believed that the Fed would not raise rates until 2023.

Equivalent figures will be published at 15:45 (European time) for the US.

Right now the pair is trading at $1.1630.

KEY CHART ELEMENTS
With the 20-day moving average (in dark blue) having been breached again, in a high volatility level, we are momentarily unlocking our bearish targets ($1.1486 and $1.1360), and will wait for a break below this dynamic technical level to work the spot lower again.

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view on the pair is neutral.

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.1532 and resistance at $1.1674.