Euro Exchange Rates Today Fail to Benefit from Good Data, Outlook For EUR/USD, EUR/GBP Now Dominated by ECB

The calendar for the euro exchange rate (EUR) complex was busy on Wednesday with the outlook being dominated by the release of PMI readings and technical considerations. The eye-opened for us has been the inability of great data results to boost the shared currency.

A look at the euro on the global currency markets on Wednesday afternoon in London shows the shared currency failed to benefit from what were unanimously better-than-expected Service PMI releases:

"The euro was trading close to session lows against the dollar on Wednesday, despite upbeat reports on euro zone private sector activity and retail sales, ahead of the European Central Bank’s meeting on Thursday," says a note from Investing.com.

Eurozone PMI's beat expectations

"The EMU services PMI was substantially higher than expected, with a good performance from Italy catching the eye. Equities tried to extend yesterday’s rebound and EUR/USD tried to leave recent lows behind. However both moves failed. The dollar remained in the drivers’ seat against the euro," says a note from Piet Lammens at KBC Markets.

AMarkit Services PMI (Feb) from Spain read at 53.7, below expectations of 55.0 but still above the reading of 50 the signifies growth.

Italy beat expectations with 52.9, markets only expected 49.8. France is still well within contractionary territory with 47.2, expectations were however for 46.9 so we can consider this to be a beat.

German Services PMI = 55.9, well ahead of an expected 55.4. Eurozone Markit PMI Composite (Feb) read at 53.3, ahead of expectations for 52.7.

For the euro pound exchange rate (EUR/GBP) the UK figure is due at 09:30, markets are looking for 58.0.

UK services beat expectations coming in at 58.2, analysts had predicted 58. This has sent the UK currency sharply higher against the Euro.

ECB meeting dominates the outlook

Data aside, it is tomorrow's decision from the ECB that will attract much interest from currency markets.

"EUR continues to weaken ahead of ECB meeting due tomorrow. While the dovish expectations weigh on the EUR-complex, the situation in Ukraine keeps the EUR in demand versus its CEE peers," note Swissquote Bank in a morning communication to clients.

Analysts are currently unanimous in expecting no change at tomorrow's ECB meeting. However, there are concerns that a soft Eurozone deflationary environment will keep the door open to further cuts this year. Thus, a degree of nervousness will likely persist.

Technical outlook for the euro dollar exchange rate

"EURUSD tests the February uptrend channel bottom (1.3725). The MACD (12, 26) flattens and will step in the bearish zone for a daily close below 1.3695 (which also is the 21-dma currently). Decent option bids are placed at 1.3700 for today’s expiry, selling interest building below. Key support remains 1.3665 (Fibonacci 38.2% on Nov-Dec rally)," say Swissquote.

Also offering guidance on the currency pair is Lewis Barber at Forex Trading University:

"This market consolidated today below key resistance at 1.3800 and dropped a bearish pin bar in the process.

"The most logical stop placement on this market would be above Friday's bullish bar for anybody looking to short. Given the amount of time this market has spent trying to move above 1.3800 and failed I would not be surprised to see a rotation lower from here."