EUR/USD managed to stabilize on lower ground following the Fed fallout. The intentions of the Fed will come under further scrutiny in three FOMC speeches. Will Yellen’s comment be watered down? In Europe, a positive current account figure is supporting a bounce. The Russia – Ukraine crisis still grabs the news headlines but has less impact on markets. How low will the pair end the week?
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- EUR/USDÂ traded steadily around 1.3780 and began edging up in the European session..
Current range: 1.3740 to 1.38.
Further levels in both directions:
- Below: 1.3740, 1.37, 1.3650 and 1.3560.
- Above: 1.38, 1.3894, 1.3940, and 1.40
- 1.3740 is the new important support line.
- The round number of 1.38 is minor resistance.
EUR/USD Fundamentals
- 9:00 Euro-zone current account. Exp. +18.4 billion. Actual: 25.3 billion.
- 15:00 Euro-zone consumer confidence. Exp. -12 points.
- 17:45 US FOMC member Richard Fisher talks – hawk.
- 20:30 US FOMC member Narayana Kocherlakota talks – dove.
- 22:30 US FOMC member Jeremy Stein talks.
*All times are GMT
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- Yellen talk boosts dollar: This FOMC meeting was dramatic. The decision to trim QE by another $10 billion was widely expected, but her comments at the follow-up press conference gave the dollar a big boost against its major rivals. Yellen said that the Fed was on track to wind up QE in the fall,and could start to raise interest rates six months later. This is a more aggressive approach towards higher rates than the markets had expected, and the dollar responded with a surge across the board, resulting in EUR/USD breaking below uptrend support.
- Some better US figures: After a long streak of disappointments, the Philly Fed index came out better than expected and also jobless claims remained on lower ground. It will still take time for the skies to clear over the weather distortions related to the US data.
- The Draghi cap: With the recent fall, EUR/USD is far from the round 1.40 line. As we’ve seen, ECB president did not hesitate to talk the euro down once it got close to these levels. This “verbal resistance line†counters Chinese flows into the euro-zone.
- Weak German figures: The German locomotive is suffering from persistently low inflation. The German Producer Price Index came in at a flat 0.0%, short of the estimate of +0.2%. Earlier in the week, the German Wholesale Price Index posted a decline of 0.1%, its fourth drop in five releases. Also Germany’s ZEW indicator disappointed, falling below expectations.
- Ukraine crisis in the news, not in markets: Western countries and Russia are exchanging sanctions in response to the crisis and to one another but no mobilization of troops is seen anywhere. The euro-zone and especially Germany have too much to lose from a conflict and de-escalation seems the order of the day.
