The euro is steady in Wednesday trading, as EUR/USD trades just shy of the 1.36 line. In economic news, Spanish Services PMI pushed above the 50-point level in November. However, Italian Services PMI sagged, dropping to a five-month low. Eurozone Retail Sales was a disappointment, posting a second straight decline. After a slow start to the week, there’s plenty of action out of the US on Wednesday, with four key events – ADP Non-Farm Employment Change, Trade Balance, ISM Non-Manufacturing PMI and Home Sales.
Spanish Services PMI looked sharp in November, as the index climbed to 51.5 points, up from 49.6 the month before. This was the PMI’s highest level in over six years. Italian Services PMI took the opposite route, dropping to 47.2 points, compared to 50.5 in the previous reading. The Eurozone Manufacturing PMI remained steady, coming in at a healthy 51.6 points. PMI data is an important gauge of economic activity and can affect the movement of EUR/USD. Meanwhile, for the first time in the month of November, Spanish unemployment claims declined. The key indicator posted a decline of 2.5 thousand, surprising the markets, which had forecast a gain of 49.3 thousand. This was the first drop since July. Traditionally, the summer months show a decline due to the influx of tourists, so the November release was a pleasant surprise. Now the big question is whether the unemployment rate, which stands at a staggering 26%, will follow suit and show some improvement.
With inflation and growth remaining weak in the Eurozone, the ECB may make a monetary move later this week. It could opt to cut the benchmark rate for a second straight month, or lower the deposit rate, which currently stands at 0.0%. However, a move into negative territory would represent unchartered territory and could have negative consequences for the economy. If the ECB decides to reduce the deposit rate, we could see a "mini cut" of less than 0.25%. The markets are expecting the Bank to hold the current benchmark rate of 0.25%, but just last month the markets were caught by surprise as the ECB cut the rate from 0.50%.
In the US, the markets will be keeping a close eye on this week’s employment releases, stating with the ADP Non-Farm Payrolls later on Wednesday. If US employment numbers continue to improve, the Federal Reserve is likely to take action and taper QE early next year. Unemployment Claims have looked sharp for the past two releases, and if the Non-Farm Payrolls and Unemployment Rate look solid this week, the US dollar could gain ground against the euro.
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EUR/USD December 4 at 10:55 GMT
EUR/USD 1.3591 H: 1.3598 L: 1.3567
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- EUR/USD is steady in Wednesday trading. The pair has touched a high of 1.3694 in the European session.
- On the downside, 1.3585 has reverted to a support line. This weak line could fall if the dollar posts any gains. This is followed by support at the round number of 1.3500.
- The pair is facing resistance at 1.3649. This is followed by a resistance line at 1.3786.
- Current range: 1.3585 to 1.3649
Further levels in both directions:
- Below: 1.3585, 1.3500, 1.3410 and 1.3325
- Above: 1.3649, 1.3786, 1.3893, 1.4000 and 1.4140
OANDA's Open Positions Ratio
EUR/USD ratio has reversed directions in Wednesday trading and is pointing to gains in short positions. This is not reflected in the pair's movement, as the pair is showing little movement. A large majority of the open positions remain short, indicative of a trader bias towards the dollar breaking out and posting gains against the euro.
The pair is showing little movement on Wednesday. This could change during the day, as the US releases four key events, highlighted by ADP Non-Farm Payrolls.
EUR/USD Fundamentals
- 8:15 Spanish Services PMI. Estimate 50.7 points. Actual 51.5 points.
- 8:45 Italian Services PMI. Estimate 51.2 points. Actual 47.2 points.
- 9:00 Eurozone Final Services PMI. Estimate 50.9 points.
- 10:00 Eurozone Retail Sales. Estimate 0.2%.
- 10:00 Eurozone Revised GDP. Estimate 0.1%.
- 13:15 US ADP Non-Farm Employment Change. Estimate 172K.
- 13:30 US Trade Balance. Estimate -40.3B.
- 15:00 US ISM Non-Manufacturing PMI. Estimate 55.4 points.
- 15:00 US New Home Sales. Estimate 432K.
- Sep. Data – US New Home Sales. Estimate 427K.
- 15:30 US Crude Oil Inventories. Estimate -0.5M
- 16:20 President Barak Obama Speaks.
- 19:00 US Beige Book.