General market theme
After several days of losses finally the US Dollar had a good day against its European counterparties gaining ground across the board. Both the Euro and the Pound staged a sudden reversal driven mainly by Dollar strength but in the case of the Pound also by the bearish reading of the Manufacturing PMI report. Whether this turn in Dollar’s price action is a precursor of stronger employment data expectations for Friday’s NFP report remains to be seen but the technical outlook of the Euro and the Pound are now changed. Depending on the way the Eurozone Retail Sales and the UK Construction PMI reports print today we might see a further extension on these reversals so the day ahead of us looks very interesting.
Price action highlights
The Euro peaked higher at the beginning of the day yesterday reaching the 1.1600 level but as we mentioned above the rest of the day was about the US Dollar. The US currency’s strength led the Single European currency lower and this morning the Euro is trading below the 1.1500 support and the way the Eurozone Retail Sales report will print is expected to take a toll on the price action. A strong reading might allow the Euro to claw back some of the 100 pips it lost yesterday and make its way towards its previous highs while an extension of the reversal should take the currency rate towards the 1.1400 support level.
The Cable also started the day higher yesterday but the bearish printing of the Manufacturing PMI report could be disregarded and finally the Pound reacted to the fundamental data. The UK currency dropped towards the 1.4500 area and at the time of typing the rate is trading around the 1.4550 level ahead of the Construction PMI release. If it prints bearish as well and Dollar’s strength continues we might see push lower with the 1.4400 support area coming into focus.
Focus of the day
The Eurozone Retail Sales report and the UK Construction PMI reading are the two important reports this morning and we expect to see a reaction from the Euro and the Pound to their paintings. Later in the day the release of the Non-Manufacturing ISM from the US is also a very important reading and it could set the expectations for Friday’s Non-Farm Payrolls.
Collected From Fxstreet
By Alpesh Patel