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Dollar Rally Pauses After Soft Data, All Eyes on NFP

The latest PMI data showed the rate of expansion in eurozone economic activity slowing slightly at the start of the third quarter. However, growth remained close to June’s four-year high. Meanwhile, the final Markit Eurozone PMI® Composite Output Index posted 53.9 in July, down from 54.2 in June and above the earlier flash estimate of 53.7.

The dollar edged mixed against its rivals yesterday, down against the EUR, before claiming a new two weeks high. The generally positive tone of the American currency on speculation the FED will move rates next September, was hit by a series of soft data.

The ADP survey showed that the private sector created just 185K new jobs in July, well below expectations of 215K. The local Trade balance posted a wider-than-expected deficit of 43.8 billion in June, up $2.9 billion from $40.9 billion in May, revised.

The EUR/USD, that fell down to 1.0847 earlier in the day, jumped to a daily high of 1.0935, from where it turned back south following the release of the US ISM non-manufacturing report, up to 60.3, the highest in a decade, although the dollar was unable to sustain its gains, and the pair slowly climbed back higher to end the day around the 1.0900 mark.

The EUR/USD pair one-hour chart however, presents a limited upward potential, as the price remains well below its 100 SMA, whilst the technical indicators are losing their strength, but holding in positive territory. In the 4 hours chart, the 20 SMA turned sharply lower above the current price, whilst the technical indicators have recovered from oversold levels, but are still far from suggesting an upward recovery.

Selling interest is now aligned around 1.0950, and the bearish pressure will likely prevail as long as the level holds. The market may enter in wait-and-see mode on Friday, ahead of the release of the US Nonfarm Payroll report, which  is set to be a make it or break it, in regards of the dollar trend.

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