EUR/USDÂ managed to stage a gradual recovery reconquering the 1.3830 line. Less than impressing inflation figures from the euro-zone capped further significant advances. A wide range of FOMC speakers, including Yellen, as well as US housing data will set the tone later in the day.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- EUR/USD recaptured 1.38 and later 1.3830.
Current range: 1.3830 to 1.3894
Further levels in both directions:
- Below: 1.3830, 1.38, 1.3740, 1.37, 1.3650 and 1.3580.
- Above: 1.3895, 1.3964 and 1.40.
- 1.3894 is the next target, but seems far.
- 1.3830 works as a clear separator.
EUR/USD Fundamentals
- 8:00 Euro-zone current account. Exp. +22.3 billion, actual 21.9 billion.
- 9:00 Euro-zone final inflation data: CPI confirmed at 0.5%, core inflation downgraded to 0.7%.
- 12:00 US FOMC member Jeremy Stein talks.
- 12:30 US building permits. Exp. 1 million.
- 12:30 US housing starts. Exp. 0.97 million.
- 13:15 US industrial output. Exp. +0.5%.
- 13:15 US capacity utilization rate. Exp. 78.8%.
- 16:15 US Fed Chair Janet Yellen talks.
- 17:25 US FOMC member Richard Fisher talks.
- 18:00 US Beige Book.
*All times are GMT
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- Even weaker euro-zone inflation: Final inflation data for March came out slightly lower than expected. While headline inflation was confirmed at 0.5%, the lowest since 2009, core inflation downgraded to 0.7% matching the low level seen in late 2013, which was the post crisis low. The weakness capped the recovery of the euro and raises the pressure towards the initial April figures.Â
- Draghi drag – crying wolf?: The head of the ECB made significant anti-euro comments over the weekend, saying that the strength of the euro may trigger more monetary stimulus. This comment was enough to send the euro lower in a Sunday gap. The strong euro weighs on exports and lowers inflation, but without action, the euro just bounces back up. At some point, words may not be enough.
- US inflation is OK: Contrary to the euro-zone, US core inflation actually rose to 1.7%, exactly in Goldilocks territory: no deflation danger and quite far from heating inflation, despite a bloated balance sheet at the Federal Reserve.
- Is the US enjoying a spring bounce?: Recent job figures have been OK and retail sales exceeded expectations. However, markets are not 100% convinced that the US is bouncing back after the harsh winter. Perhaps we will hear more about it from Fed Chair Yellen. She didn’t make any monetary policy related comments yesterday though.
- Ukraine escalation:Â The escalation in eastern Ukraine is grabbing the headlines, with the government in Kiev acting against pro-Russian rebels. The gas supply from Russia to Europe is in danger.
More:Â Any version of euro-zone QE is going have a limited effect
