EUR/USD – Euro Stable As German, Eurozone PMIs Meet

EUR/USD has posted slight gains on Thursday, as the pair trades in the high-1.34 range in the European session. On the release front, German and Eurozone PMIs met or exceeded expectations. However, French PMI data was not as positive. In Spain, the unemployment rate dropped below 25% for the first time in almost two years. In the US, today’s key events are Unemployment Claims and New Home Sales. The markets are braced for weaker numbers from both releases.

 Here is a quick update on what’s moving the pair.

• EUR/USD was flat for most of the Asian session. The pair has edged higher in European trading.
• Current range: 1.3450 to 1.35.

Further levels in both directions: 

• Below: 1.3450, 1.34, 1.3375 and 1.33.
• Above: 1.35, 1.3550, 1.3585, 1.3610, 1.3650 and 1.3677.
• On the downside, 1.3450 is under strong pressure. 1.34 is next.
• The round number of 1.35 remains an immediate resistance line. 1.3550 follows.

EUR/USD Fundamentals

• 7:00 French Flash Manufacturing PMI. Estimate 48.5 points, actual 47.6 points.
• 7:00 French Flash Services PMI. Estimate 48.9 points, actual 50.4 points.
• 7:00 Spanish Unemployment Rate. Estimate 25.9%, actual 24.5%.
• 7:30 German Flash Manufacturing PMI. Estimate 52.2 points, actual 52.9 points.
• 7:30 German Flash Services PMI. Estimate 54.7 points, actual 56.6 points.
• 8:00 Eurozone Flash Manufacturing PMI. Estimate 52.0 points, actual 51.9 points.
• 8:00 Eurozone Flash Services PMI. Estimate 52.7 points, actual 54.4 points.
• 8:00 Eurozone Italian Retail Sales. Estimate 0.4%, actual -0.7%.
• 12:30 US Unemployment Claims. Estimate 310K.
• 13:45 US Flash Manufacturing PMI. Estimate 57.5 points.
• 14:00 US New Home Sales. Estimate 485K.
• 14:30 US Natural Gas Storage. Estimate 95B.

*All times are GMT.

For more events and lines, see the EUR/USDEUR/USDEUR/USDEUR/USDEUR/USD.

EUR/USD Sentiment

• Euro PMIs positive: Eurozone PMIs were released on Thursday, and the news was generally encouraging. German Services and Manufacturing PMIs improved in June and beat their estimates. Services PMI was particularly impressive, hitting a three-year high, at 56.6 points. In the Eurozone, Services PMI easily beat the estimate, while Manufacturing PMI met expectations. In France, however, the PMI data failed to keep pace with its European counterparts. Manufacturing PMI came in below the 50-point level for a second straight month, which points to contraction in the manufacturing sector. Services PMI pushed above 50 for the first time since March, indicating expansion.
• US inflation numbers unimpressive: US numbers were a mix on Tuesday. Inflation numbers continue to struggle, as Core CPI posted a paltry gain of 0.1%, shy of the estimate of 0.2%. The key index has looked anemic in 2014, with its highest gain this year at just 0.3%. CPI was a bit stronger, as it gained 0.3% last month, matching the forecast. Meanwhile, Existing Home Sales jumped to 5.04 million, surpassing the estimate of 4.94 million. This was the best showing we’ve seen since October, and follows a disappointing release from Housing Starts, which was published last week.
• Fed hints rate hike likely in 2015: Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill last week. Yellen declined to directly answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. The note about “stretched valuations” in some sectors of the equity markets caught investors’ attention and could serve as a hint that the Fed is set to tighten sooner. The dollar eventually reacted positively.
• Ukraine tensions weigh on euro: Geopolitical tensions are bad news for the markets, which crave stability. With violence continuing in Ukraine nervous investors have rallied around the safe-haven US dollar at the expense of other currencies, including the euro. Last week’s downing of a Malaysian Airlines jet, apparently by pro-Russian separatists, has seriously frayed relations between the West and Russia, which have already been strained since the latter annexed Crimea. Meanwhile, fighting continues between the separatists and Ukrainian forces in Eastern Ukraine. The Europeans are threatening stronger sanctions against Russia, and escalating tensions are weighing on the euro.

More: EUR/USD in downtrend as USD is on the move – Elliott Wave Analysis

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