The euro zig-zagged between losses and gains against the US dollar today, initially falling to $1.3160 due to China growth concerns and weak PMI data, before rising to $1.3213 on the back of better-than-expected retail sales.
Earlier today, PMI composite data came in lower than forecast at 49.3, while the PMI services index came in at 48.8, trailing consensus predictions of 49.4. The data, together growth concerns in China, encouraged investors to flee risky assets. However, risk appetite improved after eurozone retail sales for January surprised the market with a positive figure of 0.3%, confounding analysts who had forecast a contraction of 0.1%. The data lifted the euro, though the boost was short-lived. By around 12.15pm (London time), EUR/USD traded at $1.3184. A number of data revisions for the fourth quarter of 2011 are due out later this week, starting tomorrow with eurozone GDP.
On Thursday there's the ECB rate decision, where interest rates are widely expected to remain on hold at 1%. If the euro closes below the 100-day moving average of $1.3170, then we are likely to see further euro weakness over the short term, with the next downside level of $1.3050 looking likely. It is also worth pointing out that the moving average convergence divergence indicator (MACD) is showing currently a bearish crossover.