Manufacturing Data Reverses Euro Currency Strength
On the first trading day of the New Year, governments released manufacturing PMI data which was broadly in line with expectations. China released both its official and HSBC numbers, while Europe and the UK reported numbers that were similar to the initial flash numbers for December.
China’s manufacturing PMI was slightly worse than expected. The official measure showed a slight easing to 51.0 from 51.2, while the final HSBC measure confirmed the flash at 50.5. The most noticeable sub-component was the export outlook which fell to new 4-month lows at 49.1.
European PMIs were the main driver behind the defensive posture of the European currency. The euro area manufacturing PMI was in line with the flash reading of 52.7 and is the best in 2.5 years. Germany, which was upgraded by 54.3 from 54.2 in the flash, was a noticeable outperformer. Greece, reached ahit 4.5 year high of 49.6, and Italy, reported a 53.3 reading which is a 3-year high. There was one major disappointment which was France. At 47.0, the French reading is just below the 47.1 flash, but is off from 48.4 in November, to a 7-month low.
The UK manufacturing PMI was somewhat disappointing as well. It fell to 57.3 from 58.1.New orders declined, but remain elevated at 60.4.The employment index improved; suggesting the UK economy still enjoyed good momentum into the end of 2013.
The Euro sliced through support created by the 10-day moving average and an upward sloping trend line that connected the lows in November to the lows in December. The next level of target support is seen near 1.35.
Momentum has changed and is now negative as the MACD (moving average convergence divergence) index has generated a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The RSI moved lower with price action printing near 46, which is in the middle of the neutral range.
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