EUR/USD Consolidating, USD/JPY Benefiting from Manufacturing

NEW YORK CITY, NY – The EUR/USD is consolidating after rising sharply late on Friday. The slight improvement of the Manufacturing PMI data barely affected the pair. Meanwhile, the USD/JPY pair is benefiting from China’s unexpected manufacturing activity.

The EUR/USD is trading around the 1.101 resistance level after moving to a 1.098 support last Friday. But expectations remain low despite the pair’s bounceback as another test of the support level is likely to occur. If it breaks, the downside movement should increase, and there’s a chance the pair will trade close to the 1.088 lows.

Traders are keeping a close watch on the US’ Manufacturing PMI. ECB President Christine Lagarde’s speech will also be scrutinized. The newly-minted head of the European Central Bank’s first speech saw the euro dropping as she called for the implementation of fiscal regulations that are in tune with the ECB’s monetary policies.

There’s a possibility the euro will slip again if Lagarde suggests that the ECB will ease more in the future.

The week started on a good note as the USD/JPY pair created some traction despite a prevailing risk-on sentiment. The trading day saw the dollar continuing to improve against the yen even as recent changes in the world macroeconomic data push investors away from safe havens.

The USD/JPY appears to be approaching the 110.00 level, with the next big resistance set at around 110.50. The overall outlook remains rosy, barring significant negative news about the US’ impeachment hearings or the China-US trade disagreement.

Optimistic economic data from China, which saw its manufacturing sector enjoying an unexpected increase in November, bolstered the global risk sentiment. This was reflected in the upbeat mood felt around equity markets and strengthened by a solid follow-through increase in the bond yields of the US Treasury.

This positive sentiment pushed the USD/JPY into an intraday high of 109.73. It’s the highest the pair reached since May 30. However, the muted dollar price activity didn’t provide any extra support. Instead, it held back any runaway rally for pair.

The subdued activity and the ongoing concerns about the China-US trade deal could force investors to hold back from making any dynamic bullish bets.

The GBD/USD didn’t enjoy the same outlook as the EUR/USD and the USD/JPY pairs. It dropped to the 1.29 handle as the Conservatives’ lead over the Labour Party narrows. And while the mood in Asia remained positive on Monday, it was the Australian dollar that benefited the most. The currency was up by almost 0.50% close to 0.645.