Search ForexCrunch
  • Italian budget crisis continue to weigh on the shared currency.
  • Strong macroeconomic data releases from the U.S. boost  the demand for USD.
  • Retail sales in the euro area decline in August.

After staging a technical recovery during the early Asian session Wednesday, the EUR/USD pair came under selling pressure, once again, as the shared currency struggled to find demand amid concerns over the Italian budget crisis and disappointing macroeconomic data releases. After extending its losses toward the critical 1.15 mark in the first half of the NA session, the pair has gone into a consolidation phase and was last seen trading at 1.1520, where it was down 0.22% on a daily basis.

Today, the Eurostat announced that retail sales contracted by 0.2% on a monthly basis in August. Furthermore, the IHS Markit’s non-manufacturing PMI readings for both Germany and the euro area fell short of the market expectations to weigh on the euro. In the meantime,  Italy’s deputy Prime Minister Luigi Di Maio announced that the government confirmed the 2019 budget deficit target at 2.4%. Responding to this development,  European Affairs Minister Pierre Moscovici repeated that Italy’s deficit target was risking breaking the EU rules.  

On the other hand, the data from the U.S. confirmed the underlying strength of the economy. The ADP’s monthly report revealed that private sector employment grew by 230K in September following August’s 163K growth and the Services PMI figures released by the ISM and the IHS Markit came in above analysts’ estimates to suggest health activity in the sector. Below is FXStreet Senior Analysts Joseph Trevisani’s assessment of today’s data:

The healthy growth in ADP  employment will keep expectations intact for a robust September employment report on Friday with expectations reaching beyond the 188,000 consensus forecast.    

The service sector continues to drive the U.S. economy to new heights. Record levels of business optimism combined with the very strong ADP report, point to a further acceleration in the already robust job market in Friday’s payroll report.

With today’s data out of the way, markets are now focused on FOMC Chairman Powell’s speech later in the session. Meanwhile, the US Dollar Index is up 0.26% on the day at 95.73.

Technical levels to consider

With a decisive break below 1.1500 (psychological level/100-WMA), the EUR/USD pair could continue to edge lower toward 1.1390 (Aug. 20 low) and 1.1330 (Aug. 14 low). On the upside, resistances are located at 1.1590 (daily high), 1.1640 (100-DMA) and 1.1720 (Sep. 14 high).