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German Flash PMIs preview: What to expect in EUR/USD?

FXStreet (Mumbai) - The EUR/USD pair stalled its post-ECB recovery near 1.1120 region and hovers above 1.11 handle as we progress towards the early European trades. The main currency pair extended the previous slump and reached as low as 1.1076 levels – fresh two-month lows in early Asia, before finding fresh bids near lows at 200-DMA and retreated slightly to where it now wavers.

The major plummeted over 200-pips on Thursday after the ECB President Draghi strongly hinted towards QE extension/expansion in Dec at the ECB press conference, while stating that the bank is ready to do more, if necessary.

German final PMIs to tick lower in Sept, need for more QE?

After the ECB-led storm on Thursday, markets look forwards to a series of final manufacturing PMIs from the Euro area economies, with positive numbers expected from France but considerable weakening to be seen in Germany.

Germany’s flash manufacturing PMI in October is expected to decline to 51.9 points compared to 52.3 recorded in September, while the index for the services sector is projected to show a small downtick to 54.0 from 54.1 recorded in Sept.

While the EU flash manufacturing PMI is expected to drop to 51.8 for Oct, lower than the 52.0 booked previously. The EU's services sector is expected to show a decrease to 53.5 from 53.7 reported in Sept.

The decline in the German PMI readings in the flash numbers will continue following the plunge shown in the ZEW survey last week as the overall sentiment remains dented by the Volkswagen emission scandal.

However, providing some relief, French flash manufacturing PMI may tick up in October from 50.6 seen in August. The services sector is expected to remain in the green, considering the positive 51.9 recorded in September.

Analysts at Societe Generale note, "The (French) services PMI is expected to rise to 52.3 (from 51.9) and manufacturing should also increase (51.1 from 50.6) as domestic consumption continues to be the main driver of growth. As a result, the composite PMI would be unchanged from September at 53.6, a level consistent with GDP growth at 0.4% qoq."

EUR/USD: Key levels to watch on data

The pair recovers above 1.11 barrier with the next the immediate resistance at 1.1185 (daily pivot), beyond which 1.1200 (round number) would be tested and from there to 1.1258 (50-DMA). While immediate support in sight is located at 1.1078/76 (200-DMA + Today’s Low), below which 1.1023/1018 (Aug 12 Low + daily S1) could be tested, a breach of the last would expose 1.0850 (August lows) levels.

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