EUR/USD May 28 – Under Pressure as Markets Back in

With the US markets closed on Monday, and no releases out of Europe, the EUR/USD also enjoyed a long weekend, showing no movement. The pair has edged lower on Tuesday, and is putting strong pressure on the 1.29 line. German Import Prices posted a sharp drop of 1.4%, its worst reading since July 2012. In the US, today’s highlight is US CB Consumer Confidence.

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

EUR/USD Technical

• Asian session: Euro/dollar showed some movement, dropping below the 1.29 line and touching a low of 1.2884. We are seeing a similar pattern in the European session, as EUR/USD briefly dipped below the 1.29 before moving back up above this line.

Current range: 1.2890 – 1.2960.

Further levels in both directions: 

<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: 1.2890, 1.2840, 1.2800, 1.2750, 1.27, 1.2624 and 1.2587.
• Above: 1.2960, 1.30, 1.3050, 1.31, 1.3160 and 1.32, 1.3255, and 1.3290.
• 1.2890 is facing strong downward pressure from the pair. The next support level is 1.2840.
• On the upside, 1.2960 has strengthened as the pair trades at lower levels.

Euro showing some movement, testing 1.29 line – click on the graph to enlarge.

EUR/USD Fundamentals

• 6:00 German Import Prices. Exp. -0.2%. Actual -1.4%.
• 13:00 US S&P/CS Composite-20 HPI.
• 14:00 US CB Consumer Confidence. Exp. 70.7 points. See how to trade this event with USD/JPY.
• 14:00 US Richmond Manufacturing Index. Exp. 2 points.

For more events and lines, see the EUR/USD

EUR/USD Sentiment

• German numbers rebound: After some lukewarm PMI data out of Germany earlier in the week, there was positive news out of the Eurozone’s number one economy on Friday. GfK German Consumer Climate posted its highest level in almost six years, and IFO Business Climate surprised with a better than expected figure. German GDP bounced back from a decline in Q4, posting a modest 0.1% gain. However, German Import Prices did not keep pace, posting a decline of 1.4%. We’ll get a better picture of the direction of the German economy this week, with the releases of German CPI, Unemployment Change and Retail Sales. If these indicators meet market expectations, the shaky euro could get a much-needed boost.
• More positive news from the US: The markets are used to ups and downs in US numbers, and we continue to see alternating weeks in economic data: this past week was mostly positive, with better than expected new home sales, a record low in continuing claims and a nice rise in durable goods orders on Friday. The mixed bag of releases has made it difficult to assess the extent of the US recovery, and the US Federal Reserve has so far maintained a steady course with the current round of QE.
• Bernanke sends euro on wild ride: The markets were treated to a wild ride from the Euro, courtesy of US Federal Reserve Chair Bernard Bernanke. He first stated that tightening monetary policy could hurt the economic recovery. The euro reacted by rising sharply, testing the 1.30 level, but this proved to be a short-lived move. Bernanke later said that if US economic data improved, a decision to scale back QE could be taken in the “next few meetings”. This brought the euro back down in a hurry, Hints from Fed officials about whether QE will be maintained will continue to rock the markets.
• Fed split over QE: Overshadowed by Ben Bernanke’s testimony in Congress was the release of the minutes of the most recent FOMC policy meeting. Bernanke later said that if US economic data improved, a decision to scale back QE could be taken in the “next few meetings”. This brought the euro back down in a hurry. It should be noted that the minutes relate to a meeting which took place at the beginning of May, in contrast to the fresh testimony of Bernanke on Wednesday.
• Negative Interest Rates for ECB? Recent comments from the ECB about negative interest rates have affected the euro, and ECB Mario Draghi and other policymakers are open to the idea. On Monday, ECB Executive Board member Joerg Asmussen said that the ECB will continue it expansive monetary policy in order to boost the Eurozone economy, but urged caution on the question of whether to continue reducing rates. The ECB’s deposit rate currently stands at zero. Asmussen said that the ECB can’t simply fix uncompetitive economies with monetary policy, such as the adopting negative interest rates. We can expect a strong debate within the ECB before any moves are taken in this direction.

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