EUR/USD – Euro Steady at 1.12, Retail Sales Drops to 0.0%

The euro has edged lower on Wednesday, as EUR/USD trades at the 1.12 level. On the release front, German and Eurozone Services PMIs were within expectations. Eurozone Retail Sales slipped to 0.0%, matching the forecast. The US will release two indicators – ADP Nonfarm Employment Change and US ISM Non-Manufacturing PMI.

There were no surprises from Eurozone Services PMI reports. German and Eurozone Final Services PMIs both posted readings above the 50-point level, pointing to expansion in the services sectors. However, the news was not nearly as positive from Retail Sales, the primary gauge of consumer spending. The indicator dropped to 0.0% in June, compared to a 0.4% gain in the previous release. Earlier in the week, there was some good news on the inflation front, as Eurozone PPI posted a respectable gain of 0.7%, edging above the forecast of 0.6%. This marked the highest monthly gain since October 2012, and follows a CPI reading of 0.2%, which beat expectations. Is inflation on the rise? If so, there will be less pressure on the ECB to adopt easing measures in order to stimulate the economy and raise inflation levels, which have languished near the zero level or lower.

EUR/USD is on an impressive run, gaining some 300 points since July 27. The pair is trading at the 1.12 line, its highest level since the Brexit vote in late June. The euro posted strong gains last week, courtesy of an unexpectedly soft US GDP report. Preliminary GDP for the second quarter was projected at 2.6%, but posted a much smaller gain of 1.2%. The soft reading not only pushed the dollar lower, but has dampened enthusiasm regarding a rate hike by the Federal Reserve, which last week stayed on the sidelines yet again. On Monday, FOMC William Dudley, a close ally of Janet Yellen, said that the Brexit fallout posed a risk to the US economy and urged the Fed to proceed with caution before raising interest rates. The US will release wage growth and nonfarm payrolls later in the week, and these key employment numbers will be carefully monitored by the Fed as it mulls over a possible rate hike. The markets have circled September and December as the most likely dates for a rate hike, but if the Fed isn’t satisfied with the economy’s performance, it could delay any moves until 2017.

EUR/USD Fundamentals

Wednesday (August 3)

• 7:15 Spanish Services PMI. Estimate 55.1. Actual 54.1
• 7:45 Italian Services PMI. Estimate 51.1. Actual 52.0
• 7:50 French Final Services PMI. Estimate 50.3. Actual 50.5
• 7:55 German Final Services PMI. Estimate 54.6. Actual 54.4
• 8:00 Eurozone Final Services PMI. Estimate 52.8. Actual 52.9
• 9:00 Eurozone Retail Sales. Estimate 0.0%. Actual 0.0%
• 12:15 US ADP Nonfarm Employment Change. Estimate 171K
• 13:45 US Final Services PMI. Estimate 51.0
• 14:00 US ISM Non-Manufacturing PMI. Estimate 56.0
• 14:30 US Crude Oil Inventories. Estimate -1.6M

Upcoming Key Events

Thursday (August 4)

• 12:30 US Unemployment Claims. Estimate 265K

* Key releases are in bold

*All release times are GMT

EUR/USD for Wednesday, August 3, 2016

EUR/USD August 3 at 9:40 GMT

Open: 1.1218 High: 1.1219 Low: 1.1190 Close: 1.1194

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted small losses in European trade
•  1.1150 is providing support
•  There is resistance at 1.1278

Further levels in both directions:

• Below: 1.1150, 1.1054, 1.0925 and 1.0821
• Above: 1.1278, 1.1376 and 1.1467
• Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Wednesday, consistent with the lack of movement from EUR/USD. Short positions have a strong majority (61%), indicative of trader bias towards EUR/USD reversing directions and moving higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.