Forex Market: EUR/USD daily trading outlook

Yesterday’s trade saw EUR/USD within the range of 1.0882-1.0943. The pair closed at 1.0919, rising 0.27% on a daily basis. It has been the 11th gain in the past 22 trading days and also a second consecutive one. The daily high was a lower-high test of the high from January 29th.

At 7:17 GMT today EUR/USD was inching up 0.02% for the day to trade at 1.0921. The pair touched a daily low at 1.0912 at 5:55 GMT, overshooting the daily S1 level, and a daily high at 1.0936 during the early phase of the Asian trading session.

On Wednesday EUR/USD trading may be influenced by the following macroeconomic reports as listed below.

Fundamentals

Euro area

Services PMI data by Markit

Activity in Italys sector of services probably expanded at a slower rate in January, with the corresponding PMI coming in at a reading of 54.2, as expected by experts, down from 55.3 in the prior month. If expectations were met, January would be the 13th successive month, when the PMI inhabited the area above 50.0. Markit Economics is expected to release the official reading at 8:45 GMT.

Frances final services PMI probably confirmed the preliminary PMI reading of 50.6 in January, which was reported on January 22nd. In December the final PMI came in at 49.8, or the lowest level since January 2015, when the gauge stood at a final 49.3. The final reading for January is due out at 8:50 GMT.

The final reading of German services PMI probably confirmed the preliminary value for January, with the index coming in at 55.4, according to market expectations. If confirmed, January would be the 32nd consecutive month, when the services PMI stood above the 50.0 level. In December the final services PMI was reported at 56.0, improving from a preliminary reading of 55.4. It has been the highest PMI level since July 2014, when the gauge was at a final 56.7. The index is based on data collected from a representative panel of more than 500 companies, operating in Germanys services sector, and gauges variables such as sales, employment, inventories and prices. Markit will release the final reading at 8:55 GMT.

The final services PMI in the Euro area probably also confirmed the preliminary value for January, with the index remaining at 53.6. If so, January would be the 30th straight month of activity expansion. In December the PMI was registered at a final 54.2, improving from a preliminary reading of 53.9 and matching the final reading in November. The Purchasing Managers Index is based on a monthly survey, encompassing a sample of approximately 2 000 business entities, which represents private sector conditions in terms of new orders, output, employment, prices etc. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland. Readings above the key level of 50.0 indicate optimism (increasing activity). Higher-than-expected values of any of the above mentioned PMIs would support demand for the common currency. The final services PMI reading for the Euro region is scheduled to be released at 9:00 GMT.

Italy – consumer price inflation (preliminary estimate)

Italys preliminary annualized consumer inflation probably accelerated to 0.3% in January, according to market expectations, from a final rate of 0.1% in December, as reported on January 15th. If so, Januarys inflation would be the highest since October 2015, when a rate of 0.3% was reported as well.

In December costs of recreation and culture rose 0.6%, accelerating from a 0.1% increase in November, while prices at hotels and restaurants surged 1.1%, accelerating from a 0.9% increase in the previous month. During the same period, additional upward pressure to the annual CPI came from categories such as food and non-alcoholic beverages (up 1.2% year-on-year), health (up 0.4%), furnishings and household equipment (up 0.4%) and clothing and footwear (up 0.5%).

On the other hand, cost of transport dropped further in December, at an annualized rate of 3.3%, following a 2.8% slump in the previous month, driven by lower prices of non-regulated energy.

The nations preliminary annualized CPI, evaluated in accordance with the harmonized methodology, probably rose 0.3% in January, according to market expectations, following a final 0.1% increase in December. If so, Januarys rate would be the highest since October 2015, when annual inflation was reported at 0.3% as well.

An acceleration in the general CPI would have a limited bullish effect on the single currency. The National Institute of Statistics (Istat) is to release the preliminary CPI report at 10:00 GMT.

Eurozone – retail sales

Annualized retail sales in the Euro region as a whole probably rose 1.5% in December, according to the median forecast by experts, after in November sales climbed at a pace of 1.4%. If expectations were met, December would be the 24th consecutive period of growth. In monthly terms, retail sales probably climbed 0.3% in December, according to market expectations, following three consecutive months of decline. In November sales were 0.3% lower from a month ago. This is a short-term indicator, which provides key information about consumer spending trend on a national scale. In case the index of retail sales rose at a faster-than-projected pace, this would have a moderate bullish effect on the euro, because of the positive implications for the regions inflationary pressure and overall growth. Eurostat is expected to release the official report at 10:00 GMT.

United States

Change in employment by ADP

Employers in the US non-farm private sector probably added 195 000 new jobs during January, according to the median estimate by experts, following 257 000 new positions added in December. The latter has been the largest gain in jobs since June 2014, when 281 000 positions were added. The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of the governments employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind the US economic growth. Therefore, in case new jobs growth came above expectations, this would have a moderate-to-strong bullish effect on the US dollar. The official figure is scheduled to be released at 13:15 GMT.

Services PMI by Markit – final reading

The final Services Purchasing Managers Index probably confirmed the preliminary value for January at 53.7, reported on January 26th. If so, this would be the lowest index reading since December 2014, when the PMI was reported at a final 53.3. In December 2015 the final seasonally adjusted index stood at 54.3, improving from a preliminary reading of 53.7. Values above the key level of 50.0 indicate optimism (expanding activity). In case, however, a larger-than-projected slowdown in services sector activity was reported, this would have a moderate bearish effect on the US dollar. The final report by Markit Economics is due out at 14:45 GMT.

Non-Manufacturing PMI by the ISM

Activity in United States’ sector of services probably increased at a slower pace in January, with the corresponding non-manufacturing PMI coming in at a reading of 55.1, according to the median forecast by experts, down from a revised up level of 55.8 in December (55.3 previously). If so, Januarys PMI reading would be the lowest one since March 2014, when a level of 53.1 was reported. January would also be the 73rd consecutive month, when the gauge stood in the area above 50.0. The PMI is a compound index, based on the values of four equally-weighted components, which comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.

The New Orders Index stood at 58.2 in December, up from a reading of 57.5 in the prior month. The Employment Index advanced to 55.7 in December from 55.0 in November, while marking growth for the 22nd month in a row, according to data by the Institute for Supply Management (ISM). The Prices Index fell to 50.3 in December from 49.7 in November, which indicated prices declined in December for a third time in the past four months. The Non-Manufacturing Business Activity Index advanced to 58.7 in December from 58.2 in November, indicating growth for a 77th straight month.

Among the 17 services industries, 11 reported growth, 5 reported contraction and 1 reported no change in activity in December.

In case activity in US services slowed down more than anticipated in January, this would have a moderate-to-strong bearish effect on the US dollar. The ISM is to release the official data at 15:00 GMT.