EUR/USD – Euro Shrugs Off Disappointing German Business Confidence

EUR/USD  has edged higher  on Tuesday, as the pair trades slightly  above the 1.36 line in the European session. On the release front, German  Ifo Business  Climate  fell short of the estimate and dipped to a six-month low. It’s a busy day in the US, highlighted by CB Consumer Confidence and the second key housing event this week, New Home Sales.

 Here is a quick update on what’s moving the pair.

• EUR/USD was steady in the Asian session and has edged higher in European trading.
• Current range:  1.3585 to 1.3650.

Further levels in both directions:  

• Below: 1.3585, 1.3550, 1.35, 1.3450, and 1.34
• Above: 1.3650, 1.3677, 1.37, 1.3740, 1.3785,  1.3830, 1.3865 and 1.3905.
• 1.3585  is an  immediate  support line, serving as a perfect separator of ranges.
• 1.3650 is the next line of resistance. 1.3677 is stronger.

EUR/USD Fundamentals

• 8:00 German Ifo Business Climate. Estimate  110.3 points. Actual  109.7 points.
• 12:05 US FOMC Member Charles Plosser Speaks.
• 13:00 Belgian NBB Business Climate. Estimate -4.1 points.
• 13:00 US S&P/CS Composite-20 HPI. Estimate 11.7%.
• 13:00 US HPI. Estimate 0.6%.
• 14:00 US CB Consumer Confidence. Estimate 83.6 points.
• 14:00 US New Home Sales. Estimate 442K.
• 14:00 US Richmond Manufacturing Index. Estimate 6 points.
• 14:00 US Treasury Secretary Jack Lew Speaks.

*All times are GMT.

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

EUR/USD Sentiment

• No surprises from Fed: The Federal Reserve tapered QE for the 5th time  to $35 billion/month as expected. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won’t see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as “steady as she goes”. The dollar lost ground against its major rivals following the statement.
• US employment, manufacturing data improve: There was positive economic news out of the US on Thursday, as Unemployment Claims dipped to 312 thousand last week, beating the estimate of 316 thousand. As well, the Philly Fed Manufacturing Index, which has been on the upswing for most of 2014, continued the trend and improved to 17.8 points, crushing the estimate of 14.3. This was the index’s strongest reading since last August, and points to a manufacturing sector which is expanding in order to keep up with increasing demand.
• Eurozone PMIs slip: Eurozone PMIs are key indicators of growth in the services and manufacturing sectors, and across the board, the May  figures fell shy of their estimates. The German and Eurozone  figures remained above the 50-point level, pointing to expansion. However, the French figures remained below the 50 mark, pointing to continuing contraction in the manufacturing and services sectors of the Eurozone’s second largest economy. A worrying trend is that with the exception of Eurozone Services PMI, all of the PMIs posted their weakest reading in 2014.
• Eurozone inflation remains weak:  So far, the euro did not lose enough ground even though various European interest rates have fallen after Draghi’s big announcement. This implies yet another month of low inflation in the euro-zone. We will get  initial German numbers next week. If  the euro remains strong and inflation continues falling, the ECB will have to be even more creative.
• Key German numbers point lower:  German ZEW  Economic Sentiment weakened to 29.8 points, well off the estimate of 35.2 points. This was the worst  reading we’ve seen since November 2012. On Tuesday, German Ifo Business Climate lost ground for a second straight month, dipping to 109.7 points, short of the estimate of 110.3 points. It was the  indicator’s  lowest level in 2014, but the indicator still remains at high levels, close to the 110 mark. This release comes on the heels of Eurozone PMIs, which also softened in May.

More: EURUSD Recovering Towards 1.3700 – Elliott Wave Analysis