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Although activity in the US manufacturing sector is growing at a good pace, it did not support the US dollar in recovering its position in the market. As a result, the currency continued to decline against the euro on Friday.
As for the euro, it remained rising amid good reports on the state of the eurozone's manufacturing and services sectors, even though the data turned out to be quite ambiguous. Traders still decided to open long positions, ignoring the current coronavirus situation in Europe. Instead, what they focused on is the increasing hopes of a post-Brexit trade deal.
In addition, it seems that the bulls have already coped with the emerging downward correction in the EUR / USD pair, but still, there is a long way before the bullish trend resumes. Such will only occur if the quote breaks out and consolidates above the resistance level of 1.1870, which will make it easier to move the pair towards the 19th figure. A breakout will then deliver the pair towards price levels 1.1915 and 1.1970.
But if the bulls are less active around the level of 1.1870, pressure could return on the euro, which will push the quote to decline in the direction of support level 1.1790. A breakout from it will make it easier to achieve lows 1.1760 and 1.1705.
About economic stimulus, no matter how many expect new measures from the regulator, the ECB is unlikely to adopt one at its upcoming meeting. On several occasions, Chairman Christine Lagarde did point to the possibility of increasing the central bank's bond buyback program, however, much research is needed first before a decision will be made. The ECB has to more clearly analyze the state of the eurozone economy, thus, no additional incentive measures will be introduced before the end of this year. At the same time, the upside potential of the European currency will be limited, since it is still unclear whether the regulator will go for more decisive stimulating measures such as negative interest rate, or limit itself to expanding emergency programs to support the economy.
With regards to statistics, IHS Markit published a preliminary data on US Manufacturing PMI for October, reporting it at 53.3 points, which indicates an increase in company optimism. The composite PMI, meanwhile, was at 55.5 points against 54.3 points in September, which also suggests growth in activity.
Markit economists expect the US economy to start the fourth quarter in a strong note.
Unfortunately, the same cannot be said in Europe, as things are not going well in many parts of the eurozone. The growth of activity in the manufacturing sector was offset by a sharp decline in the service sector.
According to IHS Markit, the eurozone's Manufacturing PMI came out 54.4 points for October, higher than its 53.7 points in September. Service PMI, on the other hand, decreased from 48.0 points to 46.2 points. Economists had expected the manufacturing PMI to be 52.6 points and the Services PMI to be 46.7 points.
The largest growth in the indicator was recorded in Germany, as there, the index for the manufacturing sector rose to 58.0 points, against a forecast of only 54.8 points. Its Service PMI, meanwhile, fell from 50.6 to 48.9, against a forecast of 49.0.
In France, the Manufacturing PMI came out 51.0 points for October, while the Service PMI came out at - 46.5 points.
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