Parisians return to relax on the lawns of the Champs de Mars in front of Eiffel tower after the lockdown due to covid-19. Image source: JEROME LABOUYRIE © 123RF.com
The Consensus Forecasts Project Mixed Industrial Numbers in the Eurozone for August
The most impactful economic release this week is going to be the publication of crucial industry data in Germany and France, which is going to take place on Friday.
The significance of the simultaneous releases of Services PMI and Manufacturing PMI data in the two countries is bolstered by the fact that the recorded performance of the largest and second-largest economies in the Eurozone typically sets the tone for the entire industrial sector in the region.
The consensus forecasts expect marginal deteriorations in France and Germany's services sectors, while manufacturing in the two countries is expected to edge higher in August.
Germany Services PMI. Image source: TradingEconomics.com
German Services PMI is anticipated to fall from the downwardly revised 55.6 in July to 55.3 index points in August. The suddenness with which the coronavirus crisis hit markets in the first quarter of the year exposed the weak links in Germany's economy, and also underlined the significance of the services sector.
If the country is forced to reintroduce new lockdowns to prevent a second epidemic wave, most of the sustained economic activity would depend on services as technology allows for most workers in the sector to continue working from home.
Christine Lagarde, the Chair of the ECB, had previously underlined the need for the European economy to become even more services-oriented as opposed to relying on manufacturing, which is extremely vulnerable to economic closedowns.
That is why services data of the biggest-economy in the Eurozone represents such a crucial indicator for the overall well-being of the EU's broader economy.
The marginal deterioration of 0.3 index points, as underlined by the initial market forecasts, could, therefore, exacerbate the bearish pressure that is currently exerted on most European indices.
France Services PMI. Image source: TradingEconomics.com
Meanwhile, the French Services PMI index is expected to register an even bigger monthly contraction. The consensus forecasts project an index point depreciation from July's 57.3 to 56.3 index points.
The marginal improvements in manufacturing that are anticipated to be recorded in the two countries are unlikely to compensate for the more impactful slumps in the services sector, which could hurt the German DAX and the French CAC, as well as the euro.
The single currency has enjoyed a solid bullish run in the last month, as its global appeal rose amidst falling demand for the greenback, but Friday's data could serve as the catalyst for a new correction.
JMMC of the OPEC Set to Hold Two Meetings This Week, Likely Impacting the Price of Crude Oil
The 21st Meeting of the Joint Ministerial Monitoring Committee (JMMC) of OPEC is scheduled for this week. Two videoconferences are expected to take place on Monday and Tuesday, respectively.
The meetings of the Committee are usually prompting heightened volatility on the price action of crude oil, which continues to consolidate in a tight range around a psychologically-significant support level.
This week, the anticipated surge in volatility could be further bolstered by the escalating tensions between Greece and Turkey. The brewing conflict in the Mediterranean could impede trade in the Aegean region, thereby indirectly affecting the supply and demand for crude.
In light of the alarming prospects of a second coronavirus wave in Q3 and Q4 of 2020, the most important outcome of the meeting would be the new projections of the Committee concerning the recovery of global oil demand. At its previous meeting, the JMMC stated that:
" The Committee observed that there were encouraging signs of improvement as economies around the world open up. While there could be localized or partial lockdowns re-imposed in some places, the recovery signs are clear, both in physical and futures markets. It noted that, moving to the next phase of the agreement, the extra supply resulting from the scheduled easing of the production adjustment will be consumed as demand recovers."
The JMMC has to determine whether the increased likelihood of new economic closedowns poses a correspondingly more considerable threat to the still-recovering global demand from a month prior. If so, then the aforementioned 'extra supply' would not be entirely consumed by muted global demand as more stringent restrictions are re-imposed.
Consequently, the Committee could allude to worse prospects for the stabilization of the energy market in Q3. Such projections would, in turn, harm the price of oil, causing it to develop a more significant bearish correction.
The British Industry is Expected Pick Up Slowly After Historic Slump
This Friday, the Markit institute is scheduled to release pivotal Services and Manufacturing PMI data for the UK as well. The consensus forecasts project minor improvements in both sectors from the recorded performance in July.
UK Services PMI. Image source: TradingEconomics.com
Services, in particular, is expected to edge higher by 0.5 points in August, driving the index to 57.0. This would be welcoming development from the historic economic slump that was recorded in the second quarter.
Nevertheless, British industry continues to suffer under the weight of the protracted Brexit negotiations, and the uncertainty that stems from this gridlock.
Even as the economic activity is expected to recoup as containment restrictions in Britain eased over the last several weeks, this is unlikely to revitalize the overall pessimistic investors' sentiment.
Consequently, the FTSE100 is likely to continue depreciating as the number of COVID-19 cases in the country and elsewhere continues to rise.
British stocks are underperforming compared to French and German stocks, as can be seen on the 4H chart below, which is partially caused by the aforementioned economic contraction.
As a whole, the German DAX, the French CAC 40, and the British FTSE 100 appear to have reached a plateau – being unable to break out above the previous peaks – which signifies rising selling pressure.
The expectations for muted industry numbers in the three countries this week could, therefore, catalyze this increasingly bearish outlook, and prompt the development of a new and more significant bearish correction.
European Indices Comparison Chart. Image source: Trendsharks ©, created with TradingView.com
Other Prominent Events to Watch for:
Tuesday – the release of Monetary Policy Meeting Minutes in Australia.
Wednesday – Crude Oil Inventories in the US.
Thursday – Unemployment Claims in the US.
Friday – Retail Sales in Canada; Flash Manufacturing and Services PMI data in the US.
Over the past few weeks, the USD has lost nearly 800 pips against the JPY, driven by Japan's shift away from decades of negative interest rates. With the Bank of Japan raising rates for the second time in a row, investors are adjusting their positions to [...]
Despite its volatility, Silver remains in an uptrend. While not as dynamic as Gold, XAG often mirrors XAU’s movements. A Multiple Top has formed around $32.50, and history shows that the more a level is tested, the weaker it becomes, increasing the likelihood of a [...]
A combination of factors, including Trump-era tariffs, the emergence of DeepSeek, and a slowdown in GDP growth, has contributed to the recent pullback in the US30 from its record highs. From a technical standpoint, a Double Top pattern has formed around the [...]
Over the past month, Silver has experienced an impressive 13% surge, marking a strong bullish trend. Despite notable volatility and multiple pullbacks, the overall momentum remains firmly to the upside. This strength is further validated by the Golden Cross, a historically reliable [...]
The Swiss Stock Market has been on a remarkable rally, surging over 15% between December and January. At times, the price action resembled a near-vertical ascent. However, following the announcement of Trump’s tariffs over the weekend, Monday’s trading session opened with a [...]
Between October and January, GBPUSD experienced a significant decline, dropping by approximately 1300 pips. However, we now observe signs of a potential trend reversal. Over the past few weeks, the pair has rebounded by more than 400 pips, shifting momentum toward a [...]
For the past 1 month, the UK100 saw a fantastic 600 point rally! The occasional corrections only attracted more buyers, which is healthy for the current up trend and the RSI currently exhibits elevated demand. A 130 point correction started last week on Friday, dipped below the [...]
Over the past two weeks, Japan’s leading stock index surged 2,000 points, reflecting strong bullish momentum. However, this week saw a sharp sell-off, erasing nearly all gains since mid-January. Despite this drop, the decline stalled at the 61.8% Fibonacci retracement, a key [...]
There is a clear shift in the momentum in the Oil market, with the commodity dropping with nearly 10% for the past 2 weeks. The Death Cross, a classic sell signal, is indicating that sellers are indeed in control and we are lookin now at a strong [...]
The 350 pip rally for the past 2 weeks seems like a trend reversal for EURUSD, with buyers back in control. The strong bullish momentum is also confirmed by the Golden Cross, a historic buy signal. Corrections are healthy for the trend and we currently looking at [...]
For the past 2 weeks GBPUSD went up with 400 pips and this is why we believe we might be looking at a trend reversal. The strong bullish momentum is confirmed by the Golden Cross, a classic buy signal, which supports the hypothesis that [...]
The Death Cross formation in USDJPY signals a robust downward momentum, with the USD depreciating by 300 pips over recent weeks. Further declines exceeding 300 pips are anticipated, potentially reaching the 152.00 level. Despite several corrective pullbacks, the price has been unable to surpass the [...]
Following the formation of a Double Top pattern at the 21,930 level last Friday, the NASDAQ has experienced a significant decline, plummeting by nearly 800 points. This downturn has been primarily driven by unfavorable manufacturing data emerging from China, alongside the Bank of Japan's interest rate hike on Friday. The market reaction closely resembles the [...]
GOLD's uptrend has regained strength, with several factors supporting further gains. The RSI bounced from oversold levels and now stands at 65, signaling growing demand and increasing buying volume. Additionally, the appearance of a [...]
For the past few months, USDJPY gained 2100 pips! Then, about 10 days ago the USD started dropping and so far corrected with 300 pips, dropping down to 155.00. A local Double Bottom got formed and this level also aligns with the important [...]
For the past week, the US100 has surged by over 1,000 points, signaling strong bullish momentum. The RSI stands at 69, indicating high demand and buyer dominance. A bullish Golden Cross pattern has emerged, confirming the upward trend. Despite a brief correction yesterday, with the index dipping to [...]
The Descending Triangle on the 4-hour chart, typically a bearish signal, failed to materialize this time. Instead, the Triple Bottom support at 92,000 held strong, driving significant buying volume. A Golden Cross—a classic bullish indicator—confirms strong [...]
After a 300-point correction from its December highs, the SP500 appears to be rebounding as bulls regain control. This recovery is supported by positive economic data, including strong NFP numbers, low unemployment, and CPI readings meeting expectations—all favorable for stocks. Additionally, the earnings season began yesterday with [...]
For several months, the EUR has been trending downward, losing hundreds of pips. While occasional corrections to the upside occur, bears remain in control. The strong downward momentum is highlighted by the Death Cross pattern, a classic sell signal. Yesterday, we observed another [...]
The Dollar remains strong, with buyers firmly in control since the Fed's December comments hinting at fewer 2025 rate cuts. This drove a 400-pip rally in USDCAD, now facing resistance near 1.4450 as early buyers take profit. Corrections are part of healthy trends, and the pair is testing support at [...]
