The worries about the manufacturing sector performance in EU could contain the market sentiment in the beginning of this week with mysterious political outlook in France after the first round of the presidential elections which have shown greater than expected possibility of the social candidate Francois Hollande to win Nicolas Sarkozy and this political uncertainty in France can weigh on the Single currency in the coming days by the second round on 6th of May as the social candidate can confront imposing further austerity measures preferring supporting the growth putting aside containing the budget deficit making split in the core policy of the EU which is formed by Germany and France.
So, it looked to the market as a public referendum in France about this austerity policy and from another side, Mar EU manufacturing PMI flash reading has come down persisting of this sector weakness by sinking deeper into the contracting territory below 50 reaching 46 while the market was waiting for rising to 48 from 47.7 in February undermined by the germane manufacturing PMI preliminary reading of March which has fallen to 46.3 from 48.3 in Februarywhile the consensus was referring to rising to 49.
The Single currency has opened the week on a gap brought it below 1.32 versus the greenback and after the release of this weak data, it is trying hardly currently to stand above 1.31 while the greenback is getting momentum across the broad by the risk aversion sentiment which dampened the equities markets in EU and US.
God willing, further falling of the this pair can meet now support at 1.3056 before the psychological level at 1.30 which can be followed by other supporting levels at 1.2973. 1.2930, 1.2874 before 1.2631 which has been the pair formed bottom on 13th of last January while getting up again can face resistance at 1.3223 which has been reached by the end of last week and breaking it can open the way to 1.3384 again before 1.3489 whereas it has formed its recent top and in the case of breaking 1.3489 the pair can meet other resisting levels at 1.3546, 1.3613, 1.3808 before 1.387 which has not been broken since the end of last October and after several tries to break it in last November.
FX Market Strategist
Walid Salah El Din