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US manufacturing PMI next: impact on EUR/USD

FXstreet.com (Córdoba) - During the American session Markit Economics will release the preliminary figure of its US manufacturing PMI for May, which captures business conditions in the manufacturing sector. The May figure is expected to come in at 51.8, below April's reading of 52.1 but still above the 50.0 threshold that separates expansion from contraction.

In this regard, "a better than expected figure, particularly above that 52.1 will likely point for a continued recovery in the US economy and reinforce the idea of QE tapering anytime later this year", says Valeria Bednarik, chief analyst at FXstreet.com. "Below 51 picture turns darker: dollar can lose momentum particularly against European and commodity rivals".

As for the EUR/USD, the pair picked up momentum during the European session, underpinned by better-than-expected eurozone PMIs. EUR/USD reached the 1.2900 area before losing steam and it was last up 0.2% on the day. A decisive break above 1.2900 could lift the pair to next hurdle around 1.3000 while on the other hand, failure would put the euro on the defensive, with 1.2820 as immediate support.

"Stocks will have the last word and in a risk aversion environment, a negative PMI reading but not completely discouraging could end up favoring further greenback gains", Bednarik adds.

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