The euro held the bid throughout most of the European session today though it did slip below the 1.2100 figure as two days of massive increases spurred short term accounts to book profits. The pair gained over 300 points since the New Year as market psychology shifted to a bearish dollar bias after the weaker than expected ISM numbers and dovish comments from the Fed earlier in the week.  

For its part the Euro-zone eco data continues to impress with  PMI Services jumping to 56.8 from 55.4 expected and Factory Orders rising 1.7% vs. 1% consensus, fueled by strong export demand. The one dark cloud was the drop in German Retail Sales to -1.0% but  the market anticipated some of the weakness after as IFR' s John Noonan noted, "listening to retailer sob stories". As long as the EZ business sector continues to see growth, the market is convinced that the recovery will finally filter down to the EZ consumer sparking retail spending and further contributing to the region's economic rebound.

On calendar today are ISM Services and Pending Home Sales, both of which may impact trading slightly, but by midday the markets are likely to move into the pre-NFP stall as all eyes will begin to focus on the report. Given the recent weakness in some of the economic data, the event risk appears to be the with the dollar bulls. Should the number miss the 200K estimate, the greenback may see additional weakness as consensus opinion will only harden around the idea that 4.5% will mark the end of the Fed rate hike cycle. However, should the numbers print higher, the market may see a rapid sell-off in the EUR/USD as traders quickly realize that recent calls for a Fed hike moratorium are premature.

Boris Schlossberg is a Senior Currency Strategist at FXCM.