- EUR/USD remains on track to close the second straight day in the red.
- US Dollar Index stays in the positive territory above 91.30.
- ISM Services PMI in April fell short of analysts’ estimate.
The EUR/USD pair dropped to its lowest level in more than two weeks at 1.1986 in the early trading hours of the European session. Although the pair staged a rebound and turned positive on the day, it lost its traction and was last seen losing 0.17% on a daily basis at 1.1993.
The USD’s market valuation continues to drive EUR/USD’s movements in the absence of significant fundamental drivers that could impact the shared currency’s performance against its rivals. The only data from the euro area showed that the Markit Services PMI edged higher to 50.5 in April. This reading came in largely in line with the market expectation and failed to trigger a market reaction.
In the second half of the day, the Automatic Data Processing (ADP) Research Institute announced that employment in the US private sector increased by 742,000 in April, compared to analysts’ estimate of 800,000. Additionally, the ISM Services PMI declined to 62.7 from 63.7 in March. Following these data releases, the US Dollar Index advanced above 91.30 and forced EUR/USD to push lower.
Nevertheless, ahead of Friday’s critical Nonfarm Payrolls (NFP) report, the fluctuations in major currency pair remain relatively limited.
On Thursday, Retail Sales data from the euro area and the US Department of Labor’s weekly Initial Jobless Claims report will be looked upon for fresh impetus.
Nordea analysts think that the EUR/USD pair is likely to extend its slide with the US continuing to outperform other major economies with respect to growth rates.
“We find it likely that we will end 2021 on clearly lower levels in EUR/USD compared to current spot, as the USD interest rates are simply more alive than EUR dittos, not least as the ECB seemingly wants to keep printing more into the economic rebound during the spring and early summer,” analysts said. “The fixed income market also reflects relative growth perspectives, which simply look more upbeat in the US compared to in Europe, among other things due to a more successful vaccine roll-out. We target 1.15-1.16 in EUR/USD.”
Additional levels to watch for