A Bearish Euro Ahead of the ECB meeting

The Euro broke below 1.2400, and is expected to continue its downward trend.

Ahead of some major releases, including the ECB meeting scheduled this Thursday, the euro is witnessing a sell-off; due to speculations that the ECB will take some extreme measures in order to avoid inflation. This might shift the currency to a new area, as the strong USD, and the weak global growth as well as energy and gold prices are all raising concerns as well. All these elements are expected to affect the Forex market and increase its volatility to some great levels.

Here are the major Resistance (R) & Support (S) levels of the EUR/USD:

S2 S1 Pivot Point R1 R2
1.2274 1.2353 1.2390 1.2470 1.2520

As for today’s figures, the Euro-zone Services Purchasing Managers' Index (PMI) is scheduled for release; measuring the activity level of the purchasing managers in the services sector. This report is based on surveys of about 600 business executives in private sector services companies.

These data are usually released on the third working day of each month. A level of 50.0 indicates no changes since the previous month, while a level above 50.0 indicates an increase (or improvement) and a level below 50.0 indicates a decrease (or contraction).

Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of the overall economic performance.
Ø Forecast: 51.3
Ø Previous: 51.3

A higher than expected reading should be taken as positive for the EUR, while a lower than expected reading should be taken as negative for the EUR.

Moving to UK, the Services Purchasing Managers' Index (PMI) will be released; measuring the activity level of the purchasing managers in the services sector.

Ø Forecast: 56.6
Ø Previous: 56.2

A higher than expected reading should be taken as positive for the GBP, while a lower than expected reading should be taken as negative for the GBP

As for the U.S., the ADP National Employment Report is scheduled for release; it’s a measure of the monthly change in the non-farm private employment; based on the payroll data of approximately 400,000 U.S. business clients.

The release, two days ahead of the government data, is a good predictor of the government's non-farm payroll report. The change in this indicator can be very volatile.
Ø Forecast: 223 K
Ø Previous: 230 K

A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.

The Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers' Index (PMI) (also known as the ISM Services PMI) report on Business will be released today; it’s a composite index calculated as an indicator of the overall economic condition for the non-manufacturing sector.

The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries.

A reading above 50 percent indicates that the non-manufacturing sector economy is generally expanding; while a reading below 50 percent indicates that the non-manufacturing sector is generally contracting.

Ø Forecast: 57.5
Ø Previous: 57.1

A higher than expected reading should be taken as positive for the USD, while a lower than expected reading should be taken as negative for the USD.

Moving to Canada, Bank of Canada’s (BOC) governing council members are expected to set the interest rate.

Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

Ø Forecast: 1.00%
Ø Previous: 1.00%

A higher than expected rate is positive for the CAD, while a lower than expected rate is negative for the CAD.

Bank of Canada’s (BOC) Governor, Stephen Poloz is expected to speak today. As head of the BOC's Governing Council, which controls key short term interest rates; he has a great influence over the Canadian dollar's value. Traders scrutinize his public engagements for clues regarding future monetary policy. His comments may determine a short-term positive or negative trend.

Finally, the Energy Information Administration's (EIA) Crude Oil Inventories report will be released; measuring the weekly change in the number of barrels of commercial crude oil held by the U.S. firms. The level of inventories affects the price of the petroleum products, which can have an impact on the inflation.

Ø Forecast: 1.300 M
Ø Previous: 1.946 M

We wish you luck in your trading activities.

Disclaimer: The prices and news mentioned in this outlook are absolutely no guarantee of future market performance. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades. Engaging in CFDs or Spot FX carries a high risk to your capital. You should not engage in this form of investing unless you understand the nature of the Transaction you are entering into and the true extent of your exposure to the risk of loss. Your profit and loss will vary according to the extent of the fluctuations in the price of the underlying markets on which the trade is based.