EUR/USD – Euro Steady As Retail Sales Sparkles

EUR/USD is steady in Wednesday trading, as the pair trades in the low-1.37 range in the European session. In Eurozone releases, Retail Sales hit a multi-year high, posting a strong gain of 1.6%. Spanish and Eurozone PMI Services beat the estimates, but the Italian numbers weakened. In the US, we’ll get a look at key employment data, with the release of ADP Non-Farm Employment Change. The markets are bracing for a weak reading. Today’s other major event in the US is ISM Non-Manufacturing PMI.

There was good news from Eurozone Retail Sales, as the key consumer spending indicator jumped 1.6%, easily beating the estimate of 0.9%. Eurozone Services PMIs painted a mixed picture of the services sector. Spain’s numbers dropped to 53.7 in February, well below the estimate of 55.3. There was better news from Italian Services PMI, which pushed above the 50-point line for the first time since September. The index rose to 52.9 points, beating the estimate of 50.6. A reading above the 50-point level indicates expansion. Eurozone Final Services PMI climbed to 52.6 points, above the estimate of 51.7. With recent Eurozone numbers looking respectable, ECB head Mario Draghi may opt to hold the course and not make any monetary moves this week.

Meanwhile, nervous markets are glued to the Ukraine, as Russia has effectively taken over Crimea following the ousting of the Ukrainian president, who has fled to Russia. The US and Russia continue to talk tough as the standoff between Russia and the Ukraine continue. Until this tense situation subsides, traders should be prepared for volatility in the currency markets, especially the euro.

If there was an academy award for the most unpredictable economic release in the Eurozone, Spanish Unemployment Change would have to be considered one of the favorites to win. The indicator has fluctuated wildly in recent readings, posting huge moves and leaving markets estimates in tatters. In the February release, the indicator posted a small loss of -1.9 thousand, shocking the markets which had braced for a gain of 74.2 thousand. Spanish indicators have looked solid so far in 2014, and on Monday, Manufacturing PMI posted a respectable reading of 52.5 points, pointing to slight expansion.

US employment numbers have not looked good, and the markets are not expecting good news from ADP Non-Farm Payrolls later on Wednesday. At the moment, the assumption is that the Fed will continue its QE tapering moves also in March, despite recent hiccups in key economic numbers. Speaking before the US Senate last week, Janet Yellen acknowledged the slowdown in the US economy but did not hint about any change in QE tapering. However, forward guidance could certainly be adjusted if the unemployment rate continues falling. The meeting minutes indicated that interest rates are unlikely to rise, even if unemployment drops to 6.5%.

EUR/USD for Wednesday, March 5, 2014

EUR/USD March 5 at 12:35 GMT

EUR/USD 1.3734 H: 1.3745 L: 1.3707

EUR/USD Technical

• EUR/USD has edged lower in Wednesday trading. The pair touched a low of 1.3706 earlier in the European session.
• On the downside, 1.3649 is providing strong support. The next support line is at 1.3585.
• 1.3786 is the first line of resistance. This is followed by resistance at 1.3893, which is protecting the 1.39 level.
• Current range: 1.3649 to 1.3786

Further levels in both directions:

• Below: 1.3649, 1.3585, 1.3410, 1.3347 and 1.3255
• Above: 1.3786, 1.3893, 1.4000 and 1.4149.

OANDA’s Open Positions Ratio

EUR/USD ratio has reversed directions on Wednesday, pointing to gains in short positions. This is not consistent with the pair’s current movement, as the euro has edged lower against the dollar. Short positions retain a strong majority, indicative of trader bias towards the dollar moving higher.

The euro is steady in Wednesday trading. EUR/USD has edged higher in the European session.

EUR/USD Fundamentals

• 8:15 Spanish Services PMI. Estimate 55.3 points. Actual 53.7 points.
• 8:45 Italian Services PMI. Estimate 50.6 points. Actual 52.9 points.
• 9:00 Eurozone Final Services PMI. Estimate 51.7 points. Actual 52.6 points.
• 10:00 Eurozone Retail Sales. Estimate 0.9%. Actual 1.6%.
• 10:00 Eurozone Revised GDP. Estimate. 0.3%. Actual 0.3%.
• 13:15 US ADP Non-Farm Employment Change. Estimate 159K.
• 14:00 US Final Services PMI. Estimate 52.7 points.
• 15:00 US ISM Non-Manufacturing PMI. Estimate 53.8 points.
• 15:30 US Crude Oil Inventories. Estimate 0.9M.
• 19:00 US Beige Book.

*Key releases are highlighted in bold

*All release times are GMT

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