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Euro May Rise as PMI Data Triggers Short-Covering

Euro May Rise as PMI Data Triggers Short-Covering

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Euro May Rise if Upbeat PMI Figures Trigger Unwinding of Short Positions
  • Aussie, NZ Dollars Underperform as US Dollar Rebound Continues in Asia
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The preliminary set of November’s Eurozone PMI figures headlines the economic calendar in European trading hours. A slight acceleration in the pace of manufacturing- and service-sector growth is expected, with the regional composite gauge ticking up to 54.0 from 53.9 recorded in the prior month.

Economists have steadily downgraded their forecasts for Eurozone economic data since July even as realized outcomes have increasingly outperformed relative to expectations (according to data from Citigroup). That opens the door for an upside surprise.

Such a result may encourage short-covering after net speculative bets against the Euro hit the highest level in over five months, sending the currency upward. Indeed, options markets reveal bets on a near-term recovery, with 1-week risk reversals showing investors willing to pay a 63bps premium for the right to buy the common unit against the US Dollar compared with an equivalent right to sell.

Euro gains may prove short-lived however. Dovish commentary from ECB officials has set the stage for stimulus expansion at next month’s policy meeting. That means traders are unlikely to commit to a firm bullish bias, painting any immediate gains as corrective in the context of a longer-term decline.

For its part, the greenback continued to correct higher for a second consecutive session in overnight trade after dropping to a two-week low last Thursday. The Australian and New Zealand Dollars proved weakest against the greenback having outperformed in the prior week.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

11:00

EUR

ECB's Weidmann Speaks in Freiburg, Germany

-

-

-

21:45

NZD

Net Migration SA (OCT)

6210

-

5600

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

08:00

EUR

Markit France Mfg PMI (NOV P)

50.8

50.6

Low

08:00

EUR

Markit France Services PMI (NOV P)

52.5

52.7

Low

08:00

EUR

Markit France Composite PMI (NOV P)

52.5

52.6

Low

08:00

CHF

Money Supply M3 YoY (OCT)

-

1.2%

Low

08:00

CHF

Total Sight Deposits (NOV 20)

-

467.7B

Low

08:00

CHF

Domestic Sight Deposits (NOV 20)

-

401.9B

Low

08:30

EUR

Markit/BME Germany Mfg PMI (NOV P)

52.0

52.1

Medium

08:30

EUR

Markit Germany Services PMI (NOV P)

54.4

54.5

Medium

08:30

EUR

Markit/BME Germany Composite PMI (NOV P)

54.0

54.2

Medium

09:00

EUR

Markit Eurozone Mfg PMI (NOV P)

52.3

52.3

Medium

09:00

EUR

Markit Eurozone Services PMI (NOV P)

54.1

54.1

Medium

09:00

EUR

Markit Eurozone Composite PMI (NOV P)

54.0

53.9

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.0477

1.0576

1.0611

1.0675

1.0710

1.0774

1.0873

GBPUSD

1.4974

1.5101

1.5146

1.5228

1.5273

1.5355

1.5482

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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