06.03.201801:26 Forex Analysis & Reviews: The euro reacts by falling to weak data on the service sector

The sharp increase in the euro, which occurred in the morning after the news that the German Social Democratic Party voted to form a ruling coalition with Christian democrats, quickly fizzled out after weak PMI data on services.

Despite the fact that Angela Merkel managed to achieve the creation of a ruling coalition, buyers of risky assets took this news quite calmly without providing the expected support to the European currency. This puts the short-term upward trend into question.

Elections in Italy can also have a detrimental impact on the euro, as, according to polls, many Italians are unhappy with the current course of the authorities with populist parties having received about half of the vote.

Data on the indices in the services sector of Italy, Germany, and France put pressure on the euro as it significantly decreased compared to January.

According to the report, the index of supply managers for the services sector of Italy for the month of February this year fell to a level of 55.0 points, compared to 57.7 points in January. Economists predicted its decline to 56.9 points.

A similar index of supply managers for the services sector of France for the month of February was at the level of 57.4 points against 59.2 points in January despite its decline being projected to 57.9 points.

The growth of the service sector in Germany is also gradually slowing down. According to the report, the index of supply managers for the German services sector in February this year fell to 55.3 points from 57.3 points in January, which fully coincided with the forecasts of economists.

Thus, the euro area services sector fell back to 56.2 points in February, while the index of supply managers for the euro area services sector was at 58.0 points in January. The composite PMI of the eurozone in February this year fell to 57.1 points against 58.8 in January despite the fall being projected to 57.5 points.

Such data are not surprising, especially in light of the large economic growth at the end of last year.

It can not be the second month in a row that the eurozone boast of retail sales, which again declined due to more than a sharp recovery in the economy. This, according to some experts, could reach a temporary peak.

According to the report of the statistical agency, retail sales in the euro area for the month of January 2018 decreased by 0.1% compared to the previous month, after a large reduction of 1% in December last year.

This slowdown is unlikely to benefit the GDP of the euro area, which could also seriously slow its growth in the first quarter of this year.

The technical picture in the EURUSD pair remained unchanged compared with the morning forecast. The main support for the trading instrument remains the area of 1.2265, the breakthrough of which will hit the stop-orders of buyers. This will collapse the EURUSD to the monthly lows of 1.2190 and 1.2150.