The euro has started the month of June with a bang, as EUR/USD  continues to push higher. The pair has gained close to one cent this week, and was trading in the high-1.30 range in Tuesday’s European session. The euro got a boost from excellent Spanish numbers, as Unemployment Change dropped sharply. US key releases continue to slump, as ISM Manufacturing PMI came in below the estimate. Today’s highlight is US Trade Balance. The markets are expecting a slightly higher deficit than in the May release.
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 lower, touching a low of 1.3054. The pair consolidated at 1.3060. In the European session, the pair is putting pressure on the 1.31 line.
Current range: 1.3050 – 1.3100.
Further levels in both directions:Â 
<img alt=â€EUR USD Daily Forecast May31″ src=â€https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May31-350×196.png†width=â€350″ height=â€196″ />Â
<img alt=”EUR USD Daily Forecast May30″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May30-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast May29″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May29-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast May28″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May28-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast May27″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May271-350×196.png” width=”350″ height=”196″ />
- Below: 1.3050, 1.30, 1.2940, 1.2890, 1.2840, 1.28, 1.2750, 1.27, 1.2624 and 1.2587.
- Above: 1.31, 1.3160, 1.32, 1.3255, and 1.3290, 1.3350, and 1.34.
- On the upside, the pair is testing 1.3100. 1.3160 is next.
- 1.3050 is providing weak support. This is followed by 1.3000.
Euro edges higher after strong Spanish employment data – click on the graph to enlarge.
EUR/USD Fundamentals
- 7:00 Spanish Employment Change. Exp. -50.2K. Actual -98.3K.
- 9:00 Eurozone PPI. Exp. -0.2%. Actual -0.6%.
- 12:30 US Trade Balance. Exp. -41.1B.
- 14:00 US IBD/TIPP Economic Optimism. Exp. 50.2 points.
- 17:30 US FOMC Member Esther George Speaks.
For more events and lines, see the EUR/USDÂ
EUR/USD Sentiment
- Spanish Unemployment Change Plummets: Spain posted some exceptional employment numbers on Tuesday, as Unemployment Change dropped by 98.3 thousand, the best performance ever for the month of May. The estimate stood at -50.2 thousand. The solid numbers are a boost for Prime Minister Mariano Rajoy, whose government remains deeply unpopular due to a strict austerity program. However, there’s no need to break out the champagne just yet. May is often a good month for employment numbers, and the Unemployment Rate hit a record high of 27.1% in Q1, so the employment picture remains grim, despite the solid Unemployment Change release.
- Spain begins June with solid numbers: Spanish numbers have sizzled this week. Manufacturing PMI jumped from 44.7 points to 48.1 points, the index’s highest reading since June 2011. This was followed by Unemployment Change, which pointed to 98 thousand less claims, a record for the month of May. Both indicators easily beat expectations. If the Eurozone’s fourth largest economy continues to post solid numbers, this could signal that Spain is on the road to recovery. Spanish Services PMI will be released on Wednesday, and the markets will be hoping for more good news.
- Eurozone Manufacturing PMIs Climb Higher: The new trading week started on the right foot, as Eurozone Manufacturing PMIs all moved higher. Italy’s Manufacturing PMI hit a four-month high, climbing to 47.3 points. Eurozone Final Manufacturing PMI hit its highest level in over a year, reaching 48.3 points. Spanish Manufacturing PMI rose sharply, from 44.7 points to 48.1 points. However, the positive readings are tempered by the fact that all three indicators remain stuck below the 50-point level, indicating continuing contraction in the Italian, Spanish and Eurozone manufacturing sectors. The indicators are certainly pointing in the right direction, but if the manufacturing industry is to get back on its feet in Europe, we will need to see some readings above the 50 level.
- Will Fed Wind Up QE?: Although the Fed hasn’t made any changes to the current round of QE, Fed policymakers, including Fed Chair Bernanke, continue to hint that QE could be scaled back in the next few months. With the US continuing to alternate between good and bad economic releases, the Fed may continue to hold off on any changes to QE before it is convinced that the US economy is improving. The currency markets have reacted sharply to talk about terminating QE, and much of the volatility we are seeing from EUR/USD can be attributed to market uncertainty about what action the Fed will take. We can expect the currency markets to continue to be very sensitive to further talk of tapering QE.
- Markets Await ECB Rate Announcement: The markets are already speculating on what action, if any the ECB will take when it holds a policy meeting later this week. EUR/USD has gone on wild rides after recent meetings, even though interest rates were left untouched, and this could well be the case this time as well. There has been more talk of negative interest rates, and Mario Draghi and other policy makers have hinted that they are open to the idea. The ECB’s deposit rate currently stands at zero, and if the ECB decides to go lower, it would be the first central bank to introduce negative interest rates. Negative rates would be bad for the euro, as investors would likely look outside the Eurozone to get more attractive rates for their funds, rather than paying the ECB to hold their deposits. If Draghi repeats his openness to the concept, the dollar could get a lift against the euro.
