EUR/USD: wait-and-see mode
EUR/USD is trading slightly below the monthly highs in the $1.3065/3105 range on Wednesday. Market players remain uncertain about the further direction. A better than expected US trade balance and Fed’s members speaking about QE tapering support the US dollar, limiting the upside in EUR/USD. However, recent EU figures have also given some positive signals, so the pair holds above the $1.3000 barrier. The market has switched into a wait-and-see mode ahead of the ECB meeting on Thursday and US NFP on Friday.
Today’s data showed that Spanish services PMI rose to 47.3 in May, while Italian services PMI contracted to 46.5. Final services PMI dipped to 47.2. Later in the day watch the euro zone’s retail sales (forecast – negative), and in the US – non-farm employment change from ADP, ISM non-manufacturing PMI and factory orders (all the forecasts are positive).
Given all that, we would expect EUR/USD to retrace lower today. However, the pair remains well-supported above $1.2950. A break below this level would activate the bearish scenario with an initial target of $1.2750. A clear break above the $1.3110 resistance would open the way for a rise to $1.3200. The $1.3250 level remains a strong resistance for now.
Chart. Daily EUR/USD