EUR/USD June 26 – Lower as US Numbers Shine

EUR/USD continues to lose ground in the Wednesday session. The pair fell on Tuesday, as strong US data gave the dollar a boost. In Wednesday’s European session, the pair is trading in the mid-1.30 range, its lowest levels since early June.  In economic news, there are no key releases on the schedule. The day started on a positive note, as German Consumer Climate climbed to a multi-year high. In a surprise development, ECB President Mario Draghi will address the National Assembly in Paris. Over in the US, the markets will get a look at Final GDP. The markets are expecting a strong improvement from last month, with an estimate of a 2.4% gain.

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

EUR/USD Technical

• Asian session: Euro/dollar was steady, touching a low of 1.3057 and consolidating around 1.3070. The pair has edged lower in the European session.

Current range: 1.3050 – 1.31.

Further levels in both directions:  

<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: 1.3050, 1.30, 1.2940, 1.2890, 1.2840, 1.28, 1.2750 and 1.27.
• Above: 1.31, 1.3160, 1.32, 1.3255, 1.3350, 1.34, 1.3434, 1.3480
• The pair is testing 1.3050 on the downside. The round number of 1.30 is next.
• 1.3100 is providing weak resistance. This is followed by 1.3160.

Euro continues to lose ground after strong US numbers – click on the graph to enlarge.

EUR/USD Fundamentals

• 6:00 GfK German Consumer Climate. Exp. 6.6 points. Actual 6.8 points.
• 7:48 ECB President Mario Draghi Speaks.
• All Day – ECOFIN Meetings.
• 12:30 US Final GDP. Exp. 2.4%.
• 12:30 US Final GDP Price Index. Exp. 1.1%.
• 14:30 US Crude Oil Inventories. Exp. -1.9M.

For more events and lines, see the EUR/USD

EUR/USD Sentiment

• Strong US Numbers Boost Dollar: US releases impressed the markets on Tuesday, with all three key releases looking sharp. Core Durable Goods rose 0.7%, easily surpassing the estimate of 0.0%. CB Consumer Confidence shot up to a multi-year high, at 81.4 points. The estimate stood at 75.2 points. New Home Sales came in at 476 thousand, well above the estimate of 462 thousand. Manufacturing data, often a sore spot, also looked good as the Richmond Manufacturing Index jumped to 8 points. All in all, it was an excellent day for the US, and the dollar responded by posting gains against the struggling euro.
• Fed Backtracking on QE?: After Federal Reserve Chair Bernard Bernanke said last week 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 raises concern: Germany has long been considered the locomotive of Europe, but the number one economy in the Europe has been struggling. Last week, German Manufacturing PMI missed the estimate, and remained under the 50-point level, indicating contraction. German PPI also disappointed, posting a decline of -0.3%. On  Monday, German Ifo Business Climate, a key indicator, came in at 105.9 points, just short of the estimate of 106.0. These readings cannot be considered confidence builders by any stretch of the imagination. There was better news on Wednesday as German Consumer Climate beat the estimate, but the markets will want to see further strong numbers out of Germany before there can be serious talk of a Eurozone recovery.
• Greek government faces crisis: Greece is once again facing political turmoil as the smallest party in the governing coalition, the Democratic Left Party, quit on Friday. The reason was the government’s decision to close the state broadcaster as part of its plan to eliminate 15,000 public sector jobs by 2014, as mandated by the bailout agreement. The loss of the Democratic Left leaves the coalition with a razor-thin majority of just three seats. The timing of this crisis is particularly bad, as Greece is due to receive another installment of bailout funds next month. The troika (European Commission, ECB and IMF) are playing down the crisis, saying that the bailout will proceed on schedule. If this proves not to be the case, we could see the euro run into some turbulence.

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