EUR/USD remains boxed in on Tuesday, as the pair continues to trade in the low-1.38 range in the European session. On the release front, German Ifo Business Climate weakened in February but met expectations. Later today, ECB head Mario Draghi will speak at an event in Paris. In the US, we’ll get a look at CB Consumer Confidence and New Home Sales.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- EUR/USD was quiet in the Asian session. The pair has edged lower in European trading as it trades just above the 1.38 line.
Current range: 1.38 to 1.3895.
Further levels in both directions:Â Â Â Â 
- Below: 1.38, 1.3740, 1.37, 1.3650 and 1.3560, 1.3515 and 13450.
- Above: 1.3895, 1.3940, and 1.40
- On the downside, 1.38 is under strong pressure. 1.3740 is the new important support line.
- 1.3895 is a strong resistance line.
EUR/USD Fundamentals
- 9:00 German Ifo Business Climate. Exp. 110.9, actual 110.7 points.
- 13:00 US S&P/CS Composite-20 HPI. Exp. 13.3%.
- 13:00 US HPI. Exp. 0.7%.
- 14:00 US CB Consumer Confidence. Exp. 78.7 points.
- 14:00 US New Home Sales. Exp. 447K.
- 14:00 US Richmond Manufacturing Index. Exp. -1 point.
- 16:00 ECB President Mario Draghi Speaks.
- 16:30 Deutsche Bundesbank President Jens Weidmann Speaks.
- 23:00 FOMC Member Charles Plosser Speaks.
*All times are GMT For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- More even growth in the euro-zone?: France was already called “the sick man of Europeâ€, but the recent figures show that France is picking up while Germany is slowing down. This was underscored by the Services and Manufacturing PMIs in February, as the French numbers improved but the German numbers slipped. The convergence is improving. The recovery in the euro-zone is still quite fragile though and the German locomotive is needed.
- Chinese worries: The Chinese Flash Manufacturing PMI fell short of predictions yet again, pointing to faster contraction. This is a worry for German exports. On the other hand, flows from China into the euro-zone keep the euro bid.
- Yellen talk bolsters dollar: Last week’s FOMC meeting, the first with Janet Yellen as Fed chair, 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.
- US numbers point higher: 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.
- 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. Tensions remain high, but the markets have weathered the storm so far.
