EUR/USD Aug 5 – Euro Starts Off Week Quietly as

After showing some volatility late last week, EUR/USD has started off the week quietly. The pair is trading just below the 1.33 line in European trade on Monday. On Friday, US Non-Farm-Employment Change was a disappointment, falling well short of expectations. The Unemployment Rate edged lower, dropping to 7.4%. Taking a look at Monday’s events, Spanish  Services PMI came in as expected, while Italian Services PMI jumped to its best level in over two years. Today’s sole event out of the US is a market-mover, ISM Non-Manufacturing PMI.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar dropped was steady, touching a low of 1.3263. The pair consolidated at 1.3276. In the European session, the pair has edged higher and is testing resistance at 1.33.

Current range: 1.3175 to 1.3255.

Further levels in both directions: 

<img alt=”EUR USD Daily Forecast July 30th” src=”http://forexcrunch.wpengine.netdna-cdn.com/wp-content/uploads/2013/07/EUR-USD-Daily-Forecast-July-30th-350×196.png” width=”350″ height=”196″ /> 

• Below: 1.3255, 1.3175, 1.31, 1.3050, 1.30, 1.2940, 1.2890 and 1.2840, 1.28 and 1.2750.
• Above: 1.33, 1.3350, 1.34, 1.3480 and 1.3520.
• 1.3255 is providing weak support. 1.31 is stronger.
• On the upside, 1.33 is under strong pressure. 1.33 follows.

EUR/USD Fundamentals

• 7:15 Spanish Services PMI, exp. 48.4, actual 48.5 points.
• 7:45 Italian Services PMI, exp. 46.6, actual 48.7 points.
• 8:00 Eurozone Final Services PMI, exp. 49.6, actual 49.8 points.
• 8:30 Eurozone Sentix Investor Confidence, exp. 9.8 points.
• 9:00 Eurozone Retail Sales, exp. -0.6%.
• 14:00 US ISM Non-Manufacturing PMI, exp. 53.2 points.

For more events and lines, see the EUR/USD.

EUR/USD Sentiment

• Italian Services PMI jumps: Italian releases started the week on a positive note, as Services PMI climbed from 45.8 to 48.7 points, its best level since June 2011. While the jump is certainly welcome news, the key index has been under the 50 point level for over two years, indicating ongoing contraction in the services sector. Eurozone and Spanish Services PMI both edged above their estimates, but also have been below the 50-level for a long period of time. We’ll have to see some readings above 50 before we can begin to discuss a recovery in the services sector. Last week, Italian Manufacturing PMI pushed over the 50 level, so we are seeing some improvement out of Italy.
• US Non-Farm Payrolls falter: With sharp numbers from ADP Non-Farm Payrolls and US Unemployment Claims last week, there were high hopes that the all-important Non-Farm Payrolls would follow suit, but this rosy outlook never materialized. Non-Farm Payrolls dropped sharply from 195 thousand to 162 thousand, well of the estimate of 184 thousand. The US Unemployment Rate edged down to 7.4%, its lowest level in over three years. However, this is not as significant as it may seem at first glance. The reason? The participation rate in the labor market dropped to a weak 63.4%.
• Euro drops after Draghi’s dovish comments: As expected, the ECB maintained rates at the record low level of 0.50%. late last week. It was the follow-up press conference with ECB head Mario Draghi which shook up the markets and sent the euro tumbling. Draghi was quite clear about the ECB’s monetary policy for the near future, stating that the ECB will maintain an accommodative policy “for an extended period of time.” The market’s reaction to Draghi’s remarks that rates will stay low or could even drop was predictable, as the euro dropped sharply. Draghi also noted that Euro-zone growth risks remain on the downside and this added to the pressure on the euro.
• Fed maintains QE, keeps mum on tapering: The US Federal Reserve released a policy statement last week, but there was no news to shake up the markets. The Fed stated that it would continue with the present level of QE, namely $85 billion in asset purchases each month, and gave no indication about when it might taper QE. There is speculation that the Fed will press the QE trigger in September, so we could see some volatility from EUR/USD as the markets try to get a better read on the Fed’s intentions. The Fed has said it won’t taper QE without stronger employment figures, so we can expect US employment releases to be under the market microscope.

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