EUR/USD July 1 – Euro Slightly Firmer as Eurozone PMIs

EUR/USD has edged higher as we begin the new trading week. The pair is trading in the mid-1.30 range in Monday’s European session. The day started off on a positive note, as Eurozone PMIs improved. Meanwhile, Italian Monthly Employment posted another record high. Later today, the Eurozone releases CPI Flash Estimate and the Unemployment Rate.  In the US, today’s highlight is ISM Manufacturing PMI. The markets are hoping that the index will climb above the 50-point level, which indicates expansion.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar edged higher, touching a high of 1.3034 and consolidating at 1.3030. The pair has inched higher in the European session.

Current range: 1.3000 – 1.3050.

Further levels in both directions:   

<img alt=”EUR USD Daily Forecast June 28″ src=”http://forexcrunch.wpengine.netdna-cdn.com/wp-content/uploads/2013/06/EUR-USD-Daily-Forecast-June-28-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast June 27″ src=”http://forexcrunch.wpengine.netdna-cdn.com/wp-content/uploads/2013/06/EUR-USD-Daily-Forecast-June-27-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast June 26″ src=”http://forexcrunch.wpengine.netdna-cdn.com/wp-content/uploads/2013/06/EUR-USD-Daily-Forecast-June-26-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast June 25″ src=”http://forexcrunch.wpengine.netdna-cdn.com/wp-content/uploads/2013/06/EUR-USD-Daily-Forecast-June-25-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast June 24″ src=”http://forexcrunch.wpengine.netdna-cdn.com/wp-content/uploads/2013/06/EUR-USD-Daily-Forecast-June-24-350×196.png” width=”350″ height=”196″ />

• Below: 1.30, 1.2940, 1.2890, 1.2840, 1.28, 1.2750 and 1.27.
• Above: 1.3050, 1.31, 1.3160, 1.32, 1.3255, 1.3350, 1.34, 1.3434 and 1.3480.
• EUR/USD is testing resistance at 1.3050. 1.3100 is next.
• On the downside, the critical line of 1.3000 is providing support. This is followed by 1.2940.

Euro trading in mid-1.30 range after positive PMI numbers – click on the graph to enlarge.

EUR/USD Fundamentals

• 7:15 Spanish Manufacturing PMI. Exp. 48.9 points. Actual 50.0 points.
• 7:45 Italian Manufacturing PMI. Exp. 47.8 points. Actual 49.1 points.
• 8:00 Eurozone Final Manufacturing PMI. Exp. 48.7 points. Actual 48.8 points.
• 8:00 Italian Monthly Unemployment Rate. Exp. 12.1%. Actual 12.2%.
• 9:00 Eurozone CPI Flash Estimate. Exp. 1.6%. See how to trade this event with EUR/USD.
• 9:00 Eurozone Unemployment Rate. Exp. 12.3%.
• 13:00 US Final Manufacturing PMI. Exp. 52.4 points.
• 14:00 US ISM Manufacturing PMI. Exp. 50.6 points.
• 14:00 US ISM Manufacturing Prices. Exp. 50.5 points.
• 14:00 US Construction Spending. Exp. 0.6%.

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

EUR/USD Sentiment

• Eurozone Manufacturing PMIs point higher: There was good news to start the week as Eurozone Manufacturing PMIs moved higher. Spanish Manufacturing PMI has been moving upwards recently, and reached the 50.0 level for the first time since May 2011. A reading above 50 indicates expansion. Italian and Eurozone Manufacturing PMIs also beat their estimates, but remain under the 50 level. If the week continues with more positive releases out of the Eurozone, we could see the euro show some improvement.
• US Posts Solid Numbers: We have become accustomed to seeing mixed numbers out of the US, but last week’s releases were sharp, for the most part. Manufacturing, consumer confidence and housing numbers all beat their estimates. Unemployment Claims bounced back after a poor release the week before, and almost matched the estimate. Although GDP fell short of the estimate, the dollar did not lose ground. These solid numbers are particularly encouraging as they come from a wide range of economic sectors, and could signify that the US recovery is deepening.
• Global growth downgraded: Global economic growth has not been particularly strong, and has now been downgraded by the HSBC. In its report, HSBC said that it had lowered its forecast due to the US Federal Reserve decision to cut QE, as well as a sharp slowdown in China and other emerging  countries such as India and Brazil. The report revised China’s GDP from 8.2% to 7.4% for 2013 and from 8.4%. to 7.4% for next year. Weaker global growth will likely have a strong impact on countries which heavily depend on exports, such as Japan, Canada and Australia.
• Fed Backtracking on QE?: After Federal Reserve Chair Bernard Bernanke announced that the Fed was planning to scale down QE, the US dollar surged. However, global stock markets, including those in the US, fell sharply on the news, and the Fed assigned two Federal Reserve Presidents to manage damage control. Dallas’ Richard Fisher declared that “tapering” should not be confused with “tightening” and said that the Fed was not exiting from its accommodative policy action just yet. Minneapolis’ Naraya Kocherlakota reiterated that the Fed was continuing with an expansionary monetary policy event if QE was terminated, and said that the Fed had not turned more hawkish. One could be forgiven for dismissing these statements as little more than linguistic acrobatics, and it’s questionable if the markets will be reassured by these statements, which were clearly aimed at calming nervous investors.
• German data shows improvement: Last week did not start off well for German releases, as German Ifo Business Climate, a key indicator, came in slightly below the estimate. However, there was better news as the week progressed. German Consumer Climate hit a six-year high, while German Unemployment Claims came in well below the estimate. On Friday, German Retail Sales jumped 0.8%, surprising the markets which had anticipated a 0.2% decline. Germany is the largest economy in the Eurozone, and the “locomotive of Europe” will have to supply additional positive releases if the Eurozone is to get back on its economic feet.

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