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EUR/USD Boosted on Bumper Euro-Zone PMI Data

EUR/USD Boosted on Bumper Euro-Zone PMI Data

Nick Cawley, Strategist

Talking Points

- Euro-Zone Composite PMI hits a four-month high, beating expectations.

- Data points to 0.7% growth in the third quarter.

Check out our new Trading Guides: they’re free and have been updated for the third quarter of 2017

The latest Euro-Zone Market PMI data for September highlights the current strength in the single-currency bloc’s economy with business activity registering one of the strongest gains seen over the past six years.

The Composite PMI rose to 56.7 in September from 55.7, a four-month high, the Services reading rose to 55.6 from a prior month’s 54.7, a four-month high, while the Manufacturing PMI jumped to 58.2 from 57.4, a 79-month high.

Commenting on the release, Chris Williamson, Chief Business Economist at IHS Markit wrote: “The eurozone economy ended the summer with a burst of activity, with the PMI signalling renewed impetus to already-impressive rates of growth of output, order books and employment during September.”

According to data provider, the survey data point to 0.7% GDP growth for the third quarter, with accelerating momentum “boding well for a buoyant end to the year.”

EUR/USD moved back towards the 1.2000 level and is within 1 cent of levels last seen in January 2015.

Chart: EURUSD Five Minute Timeframe (September 22, 2017)

Chart by IG

The latest IG Client Sentiment Indicator shows that retail remain net short of EURUSD by a ratio of 2.15 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.08475; price has moved 10.5% higher since then. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.

For the latest IG Client Sentiment indicators, click here

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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