As this week comes to an end, markets are standing still awaiting the performance of the labor market in the world's largest economy for more details regarding the pace of recovery; however, markets retreated slightly against the low yielding U.S. dollar after the downbeat performance of the European services sectors which contracted significantly in April, raising fears of recession and deep contraction.
Investors are demanding more of the low yielding U.S. dollar in order to avert as much risk as possible, especially as this week comes to an end, where investors remain in the market awaiting the U.S. jobs report; however, at the same time they tend to avert risk therefore holding the U.S. dollar is the best choice, especially with speculation the jobs report will show improvement in the number of jobs added by the public sector this month.
The U.S. dollar continues the incline for the fifth consecutive session, where the greenback collected momentum after fears spread that recession in Europe is around the corner, as the fundamentals released this week, starting with unemployment, manufacturing and services data, all confirmed that the euro zone is going to slip into another phase of recession, yet we are waiting recession to be officially confirmed by growth data for the first quarter.
The U.S. dollar index (USDIX) is currently trading around 79.27 extending the gains recorded during the week, noting that the index started the day at 79.20 and recorded a high of 79.32 and a low of 79.15.
The euro zone released today the final PMI for services, which showed that the performance of the services sector contracted further in April to 46.9 from 49.2, accordingly the composite PMI contracted to 46.7 from the previous of 49.1, affected by the contraction in services and manufacturing as well.
The sharp contraction in the services sector will weigh sharply on growth, where GDP figures depends mainly on the services output which contributes with two thirds of the total GDP in the euro-area region.
The EUR/USD pair retreated on intensified recession fears, where the pair slipped to a low of $1.3126 after the news, after recorded the highest at $1.3161, noting that the pair is trading at the moment around $1.3130 and opened the session at $1.3151.
The sterling pound trades slightly above the opening level affected by fears in the markets, while the Japanese yen lost slightly against the U.S. dollar today, where we can notice that currencies are trading narrowly as investors are still waiting the U.S. jobs report, with expectations surprises are highly possible especially after the ADP report on Wednesday showed the private sector added less than expected jobs to the economy.
Technical analysis for precious metals with major support and resistance levels and recommendations for 18-08-2009