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EUR/USD: 1.18 handle to break with a focus on 55-D SMA?

  • EUR/USD making fresh lows on ADP report inline.
  • EUR/USD resilient despite growing appetite for the greenback. 

EUR/USD had been capped at 1.1848 overnight Asia but there remains an air of resilience due to cross flows into EM's despite lower bund yields. Political environment also better in euroland adding to the bid. However, today's prelude to this week's NFP's in the ADP has come in as expected at 190k vs 235k prior and the dollar has caught a broad-based bid. Currently, EUR/USD is trading at 1.1817, down -0.06% on the day, having posted a daily high at 1.1849 and low at 1.1805.

US: Private sector employment increased by 190,000 jobs in November - ADP

This data leaves the NFP's report of Friday in good sted, although there is a strong weight to the services sector (lower paid/skilled) in this ADP report, providing 155K jobs. For Friday, the median expectation in the Bloomberg survey is that the US economy created net new 200k jobs in November. Last year, the non-farm payrolls rose an average of 187k a month.

"Barring a significant surprise, the focus is on average hourly earnings more than the number of jobs created or the headline-grabbing unemployment rate," explained analysts at Brown Brothers Harriman. "In the current debate, we find ourselves in the camp that expects inflation is accelerating next year.  However, the November report may exaggerate the rise, which the median forecasts call for a 2.7% year-over-year pace from 2.4%.  The base effect is less favorable this month."  

Previous European data

Eurozone retail sales dropped 1.1% in Oct, against expectations of a 0.7% fall. Eurozone PMI data were in line with preliminary reports. Eurozone PMI data reflected broadly better-than-expected data from Italy and France but slightly softer final services and composite data from Germany. 

EUR/UD levels

Analysts at Scotiabank noted that EURUSD remains well-supported in the low/mid 1.18 area. "We note that trend strength signals are mixed across a range of time frames, which rather supports the impression of a choppy, range trade environment persisting for the moment. We see resistance at 1.1925/30. We remain constructive on the longer run outlook for the EUR," the analysts argued.

Meanwhile, on the downside, should the euro give out below the 1.18 handle, bears will be looking for a close below 1.1768 and the 55-D SMA. 1.1712 is the recent low where a game changer could come into play with technicals then leaning more bearish.

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