Euro dips after flirting with 1.19

The euro is slightly lower in the Monday session. Currently, EUR/USD is trading at 1.1861, down 0.15% on the day. The US dollar had a rough week, and the euro took advantage, with gains of 0.72%. On Friday, the euro punched across the 1.19 line for the first time in five weeks, but was unable to hold onto these gains.

The eurozone ended the week on a mixed note. Services PMIs for August in Germany and the eurozone continue to indicate significant expansion in the services sector (60.8 in Germany and 59.0 in the eurozone). However, the news was less positive from eurozone retail sales. The July reading pointed to a sharp decline of 2.3%, marking a 3-month low.

US Nonfarm payroll slides

The highly-anticipated US nonfarm payrolls was a huge miss, as the economy added only 235 thousand jobs in August. The consensus was around 750 thousand jobs and some forecasts were above the 1-million level.

The Fed has consistently said that a taper was dependent on stronger employment data, so it’s a safe bet that the jarring NFP will take the taper discussion off the table, at least until job data shows a huge improvement. This makes it very unlikely that the Fed will signal a taper at the next policy meeting on September 22nd. This is a bearish development for the US dollar, which could be in for a rough ride this week. The euro pushed across the 1.19 line on Friday, but the dollar managed to recover before the end the week.

Given the massive miss by NFP, it would not have been surprising had investors reacted with a selling frenzy of US dollar. It is entirely possible that the reaction was muted, given that many investors had left for the long weekend in the US ahead of the NFP release, and a more genuine response could well be seen on Tuesday.

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EUR/USD Technical

• On the upside, EUR/USD faces resistance at 1.1930 and 1.1983
• There is support at 1.1804 and 1.1731

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