USD well bid ahead of PMI release


The USD is ending the week better bid against the major currencies as PMI releases around the globe are one of the things traders are focusing on this morning. US Manufacturing and Service PMI for February are expected to be mixed with Manufacturing down slightly from 51.9 to 51.5, while Services PMI should be a little higher at 53.5 from 53.4. A number above 50 indicates that the economy is in expansion mode, while a number below 50 indicates contraction and possible recession. US PMI will be released at 9:45 this morning. The Coronavirus continues to weigh on trading as the number of cases has increased. Dow Futures are negative this morning, indicating an opening of around 125 points lower later today, after closing 128 points lower yesterday.


EUR/USD rallied a bit overnight, trading off of session lows as EUR Markit Composite PMI came in better than expected at 51.6 beating the forecast of 51.0 and improving from last month’s 51.3. Manufacturing PMI improved from 47.9 to 49.1 and Services PMI came in higher at 52.8 from 52.5. The EUR fell on Thursday to its lowest level since April 2017, and these economic releases have seen the EUR move higher, but the technical analysis remains bearish and positive US numbers could see renewed selling in the single currency.


GBP/USD has recovered a bit from overnight lows as PMI releases in Great Britain were mixed. Composite PMI rose from 52.8 to 53.2, with Manufacturing PMI improving from 49.7 to 51.9, while Services PMI fell slightly to 53.3 from 53.9. GBP received a boost as Manufacturing PMI was expected to remain below 50, indicating contraction. Brexit remains the main focus of traders as a recent Reuters study indicated that 25% polled expect a disorderly exit by the UK from the EU. The last poll taken showed 20% expected a disorderly exit. There is expected to be some short-covering of earlier GBP positions which could push the GBP slightly higher, this will create better selling opportunities.


USD/JPY has moved off overnight highs as some traders have returned to safe-haven JPY buying, but JPY remains under pressure as February Manufacturing PMI fell to 47.6, down from 48.8. Services PMI fell from 51.7 to 46.7, dipping into contraction. Composite PMI is also in contraction falling from 50.1 to 47.0. These numbers have analysts skeptical of a first-quarter recovery in Japan. Coronavirus concerns are high as they are beginning to affect exports, production, and tourism.


The Canadian Dollar moved lower in overnight trading as oil prices moved lower as concerns over the Coronavirus remain. Brent crude was off 0.96 cents, down to $58.35 a barrel, while U.S. crude fell $0.75 to $53.12 a barrel. Poor data from Asia has traders wondering why major producers have not attempted to cut output. Looking at technical analysis, USD/CAD seems poised to move higher, especially if US economic numbers come in as expected later this morning. 


Coronavirus cases continue to rise in China, with the total confirmed cases now at 75,465, with the death toll rising to 2,236. The newest concern regarding the virus is in South Korea as the amount of confirmed cases has risen above 200. As the virus continues to spread traders are looking at what effect this will have on the Chinese economy. Most economic figures that have been released to this point have not included any virus-related effects. These should begin to come out as we move into March.

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