The Eurozone continues to show signs of recovery after the preliminary PMI data was released

May 21, 2021 16:00

While the PMI data for April was not entirely positive, the preliminary data for the month of May resumes the path that we observed during the months of January, February and March, in which they exceeded market expectations. This positive data has highlighted the general improvement in the European economy.

At the beginning of today's session, we found out the preliminary PMI data for the manufacturing and services sector for France, Germany, the United Kingdom and for the euro area as a whole. With the exception of the German manufacturing PMI, the preliminary data for both the Manufacturing PMIs as well as services sector PMIs have exceeded market consensus expectations.

This positive data supports the uptrend of the EURUSD, since as we mentioned in our analysis of the forex market a few days ago, the break of the medium-term downtrend line is causing a new upward momentum after last week’s price, which would pull it back to its 18-session black average, while the price would rebound strongly, closing above this trend line and the 61.8% fibonacci level. 

This break may cause an upward momentum that takes the price to levels not seen since the beginning of the year, as the price is currently fighting to overcome its next resistance level. On the contrary, the loss of the 18 session average would jeopardise the continuation of the bullish momentum.

Source: EURUSD daily chart from Admiral Markets MetaTrader 5 platform from February 12, 2020 to May 21, 2021. Taken on May 21 at 11:30 CEST. Note: Past performance is not a reliable indicator of future results, or future performance.

Price evolution of the last 5 years: 

  • 2020 = + 8.93%
  • 2019 = -2.21%
  • 2018 = -4.47%
  • 2017 = + 14.09%
  • 2016 = -3.21%

How is this data interpreted?

We must remember that the manufacturing PMI is an indicator designed to provide information on the economic activity of the manufacturing sector, where a result above 50 indicates an expansion and growth of this industry. 

For its part, the PMI for the services sector measures economic activity through purchases made in this sector. As in the manufacturing PMI, a reading above 50 is considered positive suggesting good future prospects, while a reading below 50 is considered negative.

A better than expected result should be considered as positive for said economy, strengthening its currency.

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