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EUR/USD fails at 1.06, suffers losses

This is an intraday reversal, as the pair failed to break the 1.06 barrier.

The intraday trend quickly changed as soon as the pair reached the 1.06 barrier as USD bulls reappeared, pushing the EUR/USD pair to its daily lows near 1.05.

US services data mixed

The  S&P Global Services PMI decreased from 49.3 in October to 46.2 in November. This is the seventh consecutive month in which the Services PMI has contracted.

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In November, the S&P Global US Composite PMI Output Index registered 46,4, down from 48,2 in October, indicating a substantial fall in private sector business activity. The drop in output was caused by a sharper loss in service sector activity and a continuation of the decline in industrial output.

“The survey data are providing a timely signal that the health of the US economy is deteriorating at a marked rate, with malaise spreading across the economy to encompass both manufacturing and services in November.” Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said.

In contrast, the ISM Services index increased from 54.4 to 56.5 in November (well above 53.4 expected by economists)

European retail sales plunge

In the Eurozone, retail sales fell 1.8% In October, compared to -1.7% predicted and 0.8% in September, according to official data issued by Eurostat on Monday.

Annualized Retail Sales for the bloc were -2.7% in October, compared to 0% in September and the average estimate of -2.6%.

Sentiment improves?

Moreover, the Eurozone Sentix Investor Confidence index increased to -21.0 in December from -30.9 in November, in contrast to the consensus estimate of -27.1. The present situation in the Eurozone improved from -29.5 to -20.0 points in December. The expectations index increased from -32.3 to -22.0, its highest level since March 2022.

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In other news, European Central Bank (ECB) Governing Council member Gabriel Makhlouf said on Monday that he sees a 50 basis point increase in interest rates as the minimum needed at the December meeting. 

“We have to be open to policy rates moving into restrictive territory for a period in 2023. It is premature to be talking about the end-point for policy rates amid the prevailing levels of uncertainty,” he added.

As long as the euro trades above previous highs of 1.05, the short-term outlook seems bullish. In case of a breakdown below 1.05, EUR/USD might revisit the 200-day moving average near 1.035.

EURUSD daily chart, Source: Author´s analysis, tradingview.com

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