It was a volatile day for the euro yesterday. EURUSD started the day at 1.1080 and traded higher to an intraday high of 1.1115. However, the currency pair reversed all of its and finished the day practically unchanged at 1.1076.
Services PMI from Euro Zone Came In Mixed
The roster of PMI reports from the euro zone came in mixed. Italy and France disappointed with their services PMI printing at 50.4 and 52.2, missing their respective forecasts at 51.2 and 52.9. Meanwhile, the Spanish services PMI topped expectations when it came in at 53.2 versus the 51.9 forecast. The German final services PMI was also better than expected at 51.7 versus the 51.3 estimate. Euro zone final services PMI also topped the 51.5 estimate at 51.9.
Market reaction to these reports was mostly muted. In fact, we did not see volatility pick up until the New York session.
ADP and ISM Non-Manufacturing PMI Disappoint
EURUSD rallied when the ADP report for November sorely missed forecasts. It was estimated that the privately-generated non-farm employment report would show that 137,000 jobs were generated during the month. However, the actual figure came in at 67,000. This was bearish for the dollar because it suggests that the official government data, which is due tomorrow, may also miss estimates. Remember that the NFP is one of the most closely-tracked reports by the Federal Reserve. Slower job growth could force the central bank to consider they current monetary policy stance.
Bright Spots in the ISM Non-Manufacturing PMI Report
On the other hand, the disappointing ISM non-manufacturing PMI report for November had a bullish effect on the dollar. According to the Institute of Supply Management, executives in the services industry feel that growth in the industry is slowing more than expected. The forecast was for a 54.5 reading to follow the number for October at 54.7. However, the actual figure was at 53.9.
The reason for this could be that the report pointed at some bright spots in the economy despite the headline figure missing forecasts. New orders picked up 1.5 points in November while the employment component showed a 1.8-point uptick. A closer look at the report shows that the headline figure was dragged down by business activity which slowed by 5.4 points.
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EURUSD Outlook
EURUSD is still hovering around the neckline of the double bottom chart pattern I pointed out yesterday. There are no top-tier data from euro zone and the US today. This probably means that the currency pair will take its cue from market sentiment.
A break above yesterday’s high at 1.1115 could mean that EURUSD could be headed to 1.1172 which is where it topped in October. On the other hand, a close below yesterday’s low at 1.1065 could mean that EURUSD may soon re-visit support at 1.0989.Download our latest quarterly market outlook for our longer-term trade ideas.
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