The European Central Bank held the benchmark interest rate at 1.0% as expected. Mario Draghi's press conference following that offered no hint of stimulus action or rate cut going forward. The reaction to the inaction has so far held the EUR/USD above 1.31, as it popped up above 1.3165 and above the short-term consolidation zone coming into this risk event.
The 10:00AM EDT US ISM Services PMI is another key risk event ahead of the 5/4 US Non-Farm Payroll release. The ISM manufacturing data earlier in the week was what gave the USD a boost this week. Can the services data help chip away at QE expectation and help the USD? April Services PMI came out to be 53.5, falling from 56.0 and missing expectation of 55.5. While this should not boost the USD from the perspective of QE, it can still give USD strength from risk aversion flow.
EUR/USD 1H Chart 5/3/2012, 10:05 AM EDT
The EUR/USD 1H chart shows it having trouble staying above the consolidation resistance at 1.3165. Failing to push above 1.32 retains the bearish outlook, and the initial reaction after the services data reflects downside risk as well. In the bearish scenario, the 1.2970-1.30 area is key support an. Above 1.32, 1.33 will be key resistance before signaling a bullish breakout that will open up 1.3380, 1.3480 resistance pivots.
Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist of FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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