Germany

Germany May flash manufacturing PMI 54.7 vs 54.0 expected

Even though manufacturing conditions improved slightly month on month, the German services sector remains resilient, supporting economic activity. Nonetheless, there were signs that market uncertainty, rising prices, and supply issues were putting a damper on demand, with manufacturers reporting the steepest drop in new orders in nearly two years.

Meanwhile, inflationary pressures remained high, though rates of both input cost and output price inflation fell slightly from April’s all-time highs. According to S&P Global, a post-lockdown recovery in services activity remains a strong tailwind for the German economy, with May’s ‘flash’ PMI data indicating that output levels remain in growth territory.

“In terms of production levels, even manufacturing saw a slightly better performance in May.” However, as new orders continue to fall, goods producers are increasingly turning to backlogs of work to support output, which bodes ill for the sector’s growth prospects if demand for goods remains weak.

“Business confidence in the outlook remains low, with heightened uncertainty, sharply rising prices, and supply chain disruption all affecting demand and posing risks to the outlook in the goods-producing sector in particular.”

Dollar

• The retracement in the dollar continues to play out
• Risk tones are looking more sour on the day, but the dollar is seen weakening slightly as we get things going in European morning trade Part of this is also influenced by the euro’s rise in response to ECB President Lagarde’s remarks.
• She primarily reaffirmed the ECB’s policy shift, confirming that the central bank will “most likely” lift rates out of negative territory by the end of Q3.
• GBP/USD is also nearing a test of yesterday’s highs at 1.2600, with the 4 to 5 May highs at 1.2634-38 providing some additional short-term resistance.
• Meanwhile, the AUD/USD is trading up to the day’s high of 0.7090, while the NZD/USD has pared its earlier losses to 0.6445. Normally, a more pessimistic risk appetite will see the dollar gain ground, but it appears that other forces are at work here. With the dollar having gained for six weeks in a row, which only ended last week, retracement flows may be more dominant for the time being before the focus shifts back to risk sentiment.

Equities

European equities begin the day lower.

• Risk tones remain subdued for the time being.

• Eurostoxx 50 -1.2 %

• Germany’s DAX fell 1.1 percent.

• CAC 40 -1.2 percent in France

• FTSE 100 UK -0.9%

• Spain’s IBEX fell by 0.9%.

That’s a shaky start, but it reflects the more pessimistic mood seen in US futures. Following Snap’s warning earlier in the day, technology is the main laggard. S&P 500 futures are currently down 1.3 percent, Nasdaq futures are down 2.1 percent, and Dow futures are down 0.8 percent.

NZDUSD

NZDUSD Recovers to 0.6489 Weekly Resistance

NZDUSD Rally Returns To Weekly Resistance Of 0.6489 from ACY Securities Australia on Vimeo.

Monthly support is at 0.6204, and monthly resistance is at 0.6527. The monthly chart is in a downward trend, with lower tops and bottoms. Price has tested the monthly support level of 0.6204.

The weekly chart is in a downward trend. Price is returning to the weekly resistance area of 0.6489 – 0.6512.

The daily chart is in a downward trend, with lower tops and bottoms. After the RBNZ interest rate decision on Wednesday, look to sell a reversal at the 0.6489 – 0.6512 weekly resistance area.

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