NEW YORK (Forex News Now) – In forex trading news, the euro moved higher, and market participants are beginning to believe that its strength is due to combination of European Strength and Yield spread differentials.
European Monetary Union October manufacturing PMI unexpectedly rose to 54.1 from 53.7, while the services reading fell to 53.2 from 54.1 in the previous month. The consensus among analysts had been for a decline in both readings.
The upward move in the manufacturing number was in part due to an improvement in German confidence generated by the strong increase in exports, which account for nearly half of GDP. Germany has been leading the growth in the Eurozone, and despite a strong currency over the past month, manufacturing and exports have remained solid.
During the beginning stages of a recovery, mixed data should be expected, especially in the manufacturing sector. The solid conditions and market confidence suggests and that the recovery continued in the third quarter and into the fourth quarter of the year.
In other forex trading news, a plethora of Chinese data hit the tape today and much of it was better than expected. Overall, China’s economy is set to slow down, which implies that the key for Eurozone strength going forward would be structural reforms aimed at opening the service sector and increased domestic demand, which are impervious from exchange rate movements.
China released a 9.6% GDP, which was better than expected and 18.8% Retail Sales report, which also beat expectations. Having a consumer that continues to drive the market will only help exporting nation such as Germany.
The EUR/USD should now begin to consolidate and grind higher to test the recent highs near 1.4159. Today, the market regained the 1.40 level, and has support below in the 1.3775-1.3800 level.
The ADX on a weekly is still very low and has room to run on the upside. The daily ADX has turned lower, but it did not diverge when the EUR/USD hit its recent high near 1.4159. For the bull trend to continue, the EUR/USD will need to close above the recent high at 1.4159, and then it is likely to test resistance levels near weekly trend line resistance at 1.45.