EUR/USD June 28 – Steady as German Retail Sales Shines

EUR/USD  is trading in  the  mid-1.30 range on Friday.  In economic releases, German Retail Sales and French Consumer Spending easily beat their estimates. However, French PPI was well below expectations. US releases continue to be positive, as Unemployment Claims were very close to the estimate and Pending Home Sales sparkled, hitting a multi-year high. Today’s highlight is US UoM Consumer Sentiment Index.

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, touching a  high of 1.3072  and consolidating around 1.3050. The pair  is unchanged in  the  European session.

Current range: 1.3050 – 1.3100.

Further levels in both directions:  

• 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 and  1.3480.
• 1.31 is providing resistance. 1.3160 is stronger.
• On the downside, the pair is testing 1.3050. This is followed by the important level of 1.30.

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

EUR/USD Fundamentals

• 6:00  German Retail Sales. Exp.  -0.2%. Actual 0.8%.
• 6:45 French Consumer Spending. Exp. -0.1%. Actual 0.5%.
• 6:45 French PPI. Exp. -0.3%. Actual -1.2%.
• 12:00 US FOMC Member Jeremy Stein Speaks.
• 13:45 US Chicago PMI. Exp. 56.0 points.
• 13:55 US  UoM Consumer Sentiment.  Exp. 82.8 points.
• 13:55 US  UoM Inflation Expectations.

For more events and lines, see the  Euro to dollar forecast

EUR/USD Sentiment

• Draghi says  ECB’s accommodative stance to continue: Earlier this week, ECB President Mario Draghi spoke in Paris to the French parliament. Draghi reiterated that the ECB’s monetary policy would remain accommodative for the time being. He said that he expects the Eurozone  to recover in the second half of 2013, but that the  recovery  would be “gradual but fragile”. The  markets have heard these comments from Draghi and other ECB policymakers before, but based on the economic data we are seeing from the Eurozone, there is skepticism if the economy in Europe will indeed improve in the near future.
• US Posts Solid Numbers: It’s been an excellent week for US releases. Earlier this week, there were solid readings from Core Durable Goods, CB Consumer Confidence and New Home Sales. Manufacturing data, often a sore spot, also looked good as the Richmond Manufacturing Index had its best performance since last November. There was more good news on Thursday. Unemployment claims fell to 346 thousand, just below the estimate of 347 thousand. Pending Home Sales skyrocketed, posting a gain of 6.7%, its highest since 2006. This crushed the estimate of a 1.1% gain. 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.
• 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 shows improvement: The 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.