Euro recovers mildly today in spite of mixed PMI data. Eurozone PMI manufacturing dropped more than expected to 50.8 in August while PMI services dropped to 53.5. Both were below market consensus. French PMI manufacturing was weak and deteriorated to 46.5 . However, French services PMI unexpectedly improved to 51.1. German readings were positive with PMI manufacturing dropped less than expected to 52.0. German services PMI also dropped less than expected to 56.4. Markit senior economist Dobson said they didn’t see “a recovery taking real hold as yet”. Meanwhile, with strong rise in output and new orders, Germany could pull off a 0.7% expansion in Q3.
Dollar pares back some of this week’s gain in early US session but remains generally firm. Initial jobless claims dropped to 298k in the week ended August 16, slightly below expectation of 299k. Dollar surged yesterday after the more hawkish than expected FOMC minutes overnight. The FOMC minutes for the July meeting unveiled that policymakers had detailed discussion of the exit strategy. The Fed has also planned to officially update their exit principles later this year. We expect to see the update in September. On the economic outlook, the member acknowledged the improvement in the job market. Yet, they remained divided over whether the unemployment rate served as an accurate indicator of the labor market conditions. The staff revised potential growth lower and inflation higher while expecting inflation to stay below the Fed’s mandate for several years. The staff also lowered the unemployment rate forecast in response to the faster decline in the unemployment rate. More in FOMC Minutes Appeared Hawkish As Members Discussed Exit Principles In Details.
The preliminary HSBC PMI manufacturing for China dropped to 50.3 in August versus expectation from 51.5, down from prior month’s 51.7. HSBC noted that while the economic recovery in China is “still continuing”, “its momentum has slowed again”. And it noted that “more policy support is needed to help consolidate the recovery”.
Also release from Europe, UK retail sales rose less than expected by 0.1% mom in July, public sector net borrowing dropped GBP -1.1b in July. Swiss trade surplus came in wider than expected at CHF 3.98b in July. Elsewhere, Australia conference board leading indicator rose 0.4% in June, Japan manufacturing PMI improved to 52.4 in August.
Daily Pivots: (S1) 0.9102; (P) 0.9120; (R1) 0.9150; More….
Intraday bias in USD/CHF remains on the upside for 0.9156 key resistance. Decisive break there will carry larger bullish implications. In that case, further rise should be seen to 100% projection of 0.8702 to 0.9036 and 0.8855 at 0.9189 next. On the downside, break of 0.9022 support is needed to indicate short term topping. Otherwise, outlook will stay bullish in case of retreat.
In the bigger picture, price actions from 0.9971 are viewed as a correction pattern. The break above 55 week EMA argues that it might be finished at 0.8698 already. Focus is back on 0.9156 resistance. Decisive break there should confirm this case and turn outlook bullish for a test on 0.9971 high. Meanwhile, break of 0.8855 near term support will dampen this bullish view and would extend the correction to 50% retracement of 0.7065 to 0.9971 at 0.8518 and below. In that case, we’ll start to look for reversal signal below 0.8518 again.
Conference Board Leading Index Jun
Japan Manufacturing PMI Aug P
HSBC Manufacturing PMI Aug P
Trade Balance (CHF) Jul
France Manufacturing PMI Aug P
France Services PMI Aug P
Germany Manufacturing PMI Aug P
Germany Services PMI Aug P
Eurozone Manufacturing PMI Aug P
Eurozone Services PMI Aug P
Retail Sales M/M Jul
Public Sector Net Borrowing (GBP) Jul
Initial Jobless Claims Aug 16
Leading Indicators Jul
Philly Fed Survey Aug
Existing Home Sales Jul
Eurozone Consumer Confidence Aug A
Natural Gas Storage