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EURUSD Reverses Lower Amid Divergent PMI Data

FOREX
  • In a direct reversal of Monday trade, the USD index looks set to close 0.7% in the green. Gains were underpinned by higher front-end yields, the softer Euro following the weaker-than-expected PMIs and the divergent above-estimate US PMI figures.
  • Despite breaching both the 20- and 50-day EMAs, EURUSD corrected lower into the Tuesday close, consolidating back below 1.06 and defying any bullish signals that emanated from the week’s early strength. Any return higher would strengthen a short-term bull cycle and signal scope for a continuation higher.
  • In similar vein, GBPUSD has declined 0.75% amid UK flash October PMIs all printing in contractionary territory once again (services has been <50 for 3-consecutive months, while manufacturing has remained in contraction since August 2022). The trend remains bearish, and a resumption of weakness would open 1.2037, Oct 4 low. A break of this level would resume the downtrend that started in July and open 1.1964, a Fibonacci projection.
  • The Australian dollar has outperformed other majors which has prompted an impressive 1.10% move lower for EURAUD. The move matches some moderate strength for major equity indices on Tuesday and also comes ahead of tonight’s inflation data. Earlier, AUD/USD looked through a speech from RBA's Bullock, despite a step-up in rhetoric on inflation.
  • USDCAD stands 0.3% in the green ahead of tomorrow’s Bank of Canada decision. The pair hasn’t yet tested resistance at a bull trigger of 1.3786 (Oct 5 high), clearance of which would confirm a resumption of the uptrend and open 1.3862 (Mar 10 high). The BoC tomorrow could have limited impact with heightened sensitivity to geopolitical risk, but could help steer subsequent trends.
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