Today at 20.45 (GMT+3) the U.S. Purchasing Managers' Indexes (PMI) in the manufacturing and service sectors for May will be released. Business activity indices complete the overall economic picture of the country, along with such important indicators as GDP, unemployment rate and consumer price indexes.
The previous values of activity indices are forecasted to be maintained. Thus, the business activity index in the manufacturing sector is expected at the level of 50.0. The business activity index in the services sector is forecasted at 51.3.
The value of activity indices indirectly points to the tendency of growth or decline in future output and GDP size, which in turn reflects the degree of the economy's future state as overheating or cooling. An overheated U.S. economy increases inflationary pressures and consequently creates conditions for the strengthening of the U.S. dollar through the mechanism of maintaining a high interest rate. In particular, this leads to the weakening of the EURUSD currency pair.
In case of data publication, where the actual values of activity indices, in our case will be 5 points or higher than forecasted expectations, will lead to a short-term strengthening of the US dollar.
From a technical point of view, EURUSD formed a local low at 1.0815 on the hourly interval. In case of strong business activity data release, the price will probably try to break this level downwards. Also, the formed divergence of the price and RSI indicator speaks in favor of this scenario.
The final recommendation is to sell EURUSD provided that the actual value of the activity index in the U.S. manufacturing sector will be more than 55.0, and the value of the activity index in the services sector will be more than 57.0. In case of publication of index values that do not meet this condition, do not enter the market.
Profit should be taken at the level of 1.0815. A stop-loss could be set at the level of 1.0840.
The value of possible loss should not exceed 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
