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German Retail Sales, PMIs Eyed

The euro has recorded slight gains in the Wednesday session. Currently, the pair is trading at 1.1743, up 0.25% on the day.

Will German Retail Sales lift euro?

It has been a tough 2021 for the euro, which started the year above the 1.22 level but has since faltered, falling 2.6% in March alone. Germany has been hit hard by soaring infection rates and the government may be forced to impose a stricter lockdown. Retail Sales have posted back-to-back declines, but the forecast for February stands at +2.0%. A reading close to the estimate could boost sentiment towards the sagging euro. In addition, we’ll get a look at Manufacturing PMIs, with Germany and the eurozone expected to post readings well into expansionary territory.

US yields lifting the US dollar

The US dollar has shown significant strength in recent weeks, with the currency receiving a boost from US Treasury yields. On Tuesday, the 10-year yield rose to 1.77%, marking a 14-month high.

With the US economy gathering steam, conditions appear right for further gains by the US dollar. The Biden stimulus package of 1.9 trillion dollars is expected to improve economic conditions, and an aggressive vaccine rollout should bring down Covid-19 numbers in the coming weeks and months.

The dollar could make further gains before the day is out, with President Biden revealing some details of the 3-4 trillion infrastructure package at a speech in Pittsburgh. Earlier in the day, the ADP Employment Report showed a huge improvement, with 517 thousand jobs created in March, up from 117 thousand. The reading missed the estimate of 552 thousand, but is an impressive read nonetheless.

Will the official Nonfarm Payrolls report on Friday also deliver a strong report? The February reading came in at 379 thousand, and the street consensus stands at 652 thousand for March. There are expectations that the NFP could outperform, given the improving US economy. On Tuesday, Barclays Bank has sent out a note projecting a banner gain of 900 thousand, given the acceleration in the vaccine rollout, which it says should translate into an increase in February hiring.

EUR/USD Technical

EUR/USD is in correction territory and is putting pressure on support at 1.1721. If the euro falls below this line, it would target a multi-day bottom at 1.1600, with failure opening up deeper losses to 1.1200. On the upside, there is resistance at 1.1906.

The dollar index rose 0.38% to 93.30 overnight and has dipped to 93.08 today in North America. The index is now well clear of its 200-day moving average (DMA) at 92.50, with the technical picture suggesting further gains to 94.30 ahead.