Euro Run Halted By Soft Data

Eurozone Services PMI printed at 58.2 the same as period prior, but slightly lower than the forecast of 58.3. More troubling still was the decline in German services PMI, the Eurozone's largest economy, which fell to 56.6 from to 57.8 the month prior.

New Business orders dipped to 55.1 from 55.6 and Outstanding Business orders dropped through the 50 boom/bust level registering a reading of 49.8. The German data, however was offset by better than expected results from France and Italy and all three countries reported an increase in employment which bodes well for future consumer demand in the Eurozone.

Meanwhile the pair came off the highs of the New York session but hovered at the 1.2250 level as traders awaited the release of US ISM Non-Manufacturing results later today at 14:00 GMT. Earlier in the week the EZ PMI Manufacturing data exceeded US results helping to fuel the EUR/USD rally. If however, the US data produces an upside surprise, it may reverse some of the euro bullish sentiment that has built up over the past few days.

The pair now finds itself at a critical juncture as EUR/USD appears to be on the verge of an upside breakout. Our technical analyst noted that the EUR/USD saw its 20 SMA break above the 200 SMA for the first time since October of 2004 which was the last time the pair launched a 1300 point rally.

Whether history will repeat itself remains to be seen, but economic data from both regions will become even more important as ECB and the Fed will be increasingly reliant on it for their interest policies moving forward.