Usual lackluster trading session tonight ahead of the US Non-Farm payrolls due 13:30 GMT today. The Euro-zone eco data is typically bleak as every Service PMI report for the 3 major EU economies (Germany, France, Italy) shows declines from the previous month. The German numbers are especially troublesome as they slip to 51.3 from 52.2 ominously approaching the 50 expansion/contraction level with the business expectations component diving two points lower to 50.2. On the bright side. EU Retail Sales perked up to 0.7% versus 0.2% expected - the first positive move in 4 months. Stronger euro may have played a part in the better than expected gain, as European consumers enjoyed greater purchasing power spending 0.5% more on food, drink and tobacco on a month over month basis.
The mixed news produced little price action in the EUR/USD as traders squared positions ahead of US employment releases. Barring an unexpectedly low NFP number out of US our proprietary Speculative Sentiment Index is indicating that the pair may have formed an intermediate term top as retail speculators flipped from euro short positions to euro longs right at the 1.3300 handle. Furthermore, the latest flash data indicates that traders continue to buy on dips with euro longs outstripping euro shorts by 2:1 margin. Although the data hasn't reached the critical 3+ overbought ratios, the current positioning by retail speculators, which serves as contrary indicator, may be definitive enough to suggest a near term EUR/USD retrace.
The latest Goldman Sachs/Deutsche Bank derivatives auction on the NFP numbers settled at 223k - higher than the current Bloomberg estimate of 190K. If Non-Farm payrolls do indeed report higher than expected the news could easily serve as a trigger for a counter trend dollar rally possibly taking the pair below the 1.3200 handle for the first time this week.