EUR / USD bullish after eurozone manufacturing data

The euro zone manufacturing PMI stood at 58 in December, well in expansionary territory. What does this mean for EUR / USD traders?

The final manufacturing PMI data for December was released today as it is the first business day after the month has ended. With most banks on vacation in Europe and the United States, trading is slow and likely will remain so in the days to come. However, investors are already preparing for the NFP report which is due out next Friday.

Eurozone manufacturing data showed the manufacturing sector remained strong in December. The PMI is interpreted relative to the 50 level and any value above 50 indicates a growing sector, while an impression below 50 shows a contracting sector. In this case, theDecember manufacturing PMI stood at 58 , in line with expectations but well above the 50 mark.

Italian data looks particularly strong – 62 vs. 61.2 expected. On the other hand, French data hit a 2-month low.

One of the highlights of today’s report is that some signs have emerged that the supply chain crisis is starting to fade. Data shows purchasing inventories hit record levels in December, making it easier for manufacturers to meet production schedules.

EUR / USD finds strong support at 1.12

EUR / USD has not reacted to the economic data mainly because liquidity is dry as most of the market participants are still on vacation. Nonetheless, the technical chart looks bullish here, with 1.14 attracting price action.

The pair has formed a triangle against the 1.12 area, and the bias remains bullish above. A daily close above 1.14 should trigger further upside as buyers attempt to push the market towards the measured movement of the pattern shown in orange below.

Friday’s NFP is decisive

Since this is the first trading week of the month, Friday brings the NFP report to the United States – one of the most important monthly economic releases. Investors expect the US economy to create 410,000 new jobs in December and the unemployment rate to drop to 4.1%. Any hint that the labor market is moving closer to the Fed’s definition of full employment should trigger volatility in US dollar pairs, and EUR / USD in particular.

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