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The Euro moves lower on weak services data

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The Euro moves lower on weak services data

The Euro edged lower against the greenback on Tuesday as weaker than expected data did little to buoy the European currency.  Stronger yields in the US helped the greenback gain traction as stronger than expected PMI data released on Monday continue to perpetuate the idea that the Federal Reserve will begin to taper its bond purchase program after its interest rate meeting in September.

The euro zone non-manufacturing PMI was soft.  It dropped to 50.7 from the initial 51.0 reading, but it is still well above the July reading of 48.9.  France, whose flash reading had shown a decline from the 48.6 July reading, was revised to show a gain to 48.9 while Spain moved to 50.4 from 48.5.  The composite reading for the euro zone declined to 51.5 from 51.7, which, while slightly disappointing, is still the first consecutive print above-50 since July-August 2011.  New orders were at 51.0 for the first time in two years.  The euro area confirmed second quarter GDP of 0.3%. July retail sales slumped to 0.1% versus consensus 0.2%, which reflects declining consumer spending.

In the US, the trade deficit widened 3.3% to $39.1 billion in July. Economists expected it to have expanded to $38.6 billion. The trade gap with China widened to a record $30.1 billion from $26.6 billion. The $13.9 billion deficit with the European Union was also the highest ever.

The EURUSD moved below support near the 1.3187 level and could potential test support near 1.30.  Resistance is seen near the 10-day moving average at 1.3283.  Momentum on the currency pair is negative with the MACD (moving average convergence divergence index) generating a sell signal where the spread (the 12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread.  The index moved from positive to negative territory confirming the sell signal and pointing to lower price action.

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