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EUR/USD Aug. 4 – Off the lows but worried about the ECB

EUR/USD  is trading above 1.34, riding on the recovery that it enjoyed following the not-good-enough Non-Farm Payrolls on Friday. This saved the pair from a total fall. As the markets are gearing up for the ECB decision later in the week,  we have a few figures today as well.

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

  • EUR/USD  stabilized above 1.3415.
  • Current range:  1.3325 to 1.3400.

Further levels in both directions:

EURUSD Technical analysis August 4 2014 fundamental outlook and sentiment

  • Below: 1.34, 1.3365, 1.3325, 1.3295 and 1.32.
  • Above: 1.3450, 1.35, 1.3550, 1.3585, 1.3610, 1.3650 and 1.3677.
  • 1.34 returns to its role as support. The new low of 1.3365 follows.
  • 1.3450 is strong resistance.

EUR/USD Fundamentals

  • 7:00  Spanish Unemployment Change. Exp. -116.3K exp. Actual -29.8K.
  • 8:30 Euro-zone  Sentix Investor Confidence. Exp. 9.1 points. Actual 2.7 points.
  • 9:00 Euro-zone PPI. Exp. 0%. Actual +0.1%.

*All times are GMT.

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

EUR/USD Sentiment

  • US  economy surges  in Q2, employment is only OK: GDP soared in Q2, expanding at an annual rate of 4.0%. Together with a revision to Q1, the US is much closer to reaching solid growth in 2014. However, the momentum in the job market isn’t keeping up in July: the economy gained “only” 209K jobs. While the average of the past months is strong, the miss of expectations allowed for profit taking on the dollar’s earlier gains.
  • Important US inflation numbers remain subdued: Both the Fed favorite Core PCE Price Index as well as Average Hourly Earnings remained low, indicating the Americans don’t have too much money in the their pockets so raising rates to curb demand is not that urgent. The latest FOMC statement did acknowledge that inflation  could be closer to target, but expressed concern about the “underutilized” job market.
  • German economy is slowing, but wages are on the rise: After a strong grwoth rate of 0.8% in Q1, the German economy likely grew at a slow pace in Q2. All the signs point to this. However, the  euro-zone locomotive enjoys a strong job market that already triggers calls for wage hikes, even from the Bundesbank. Such a rise would push euro-zone core inflation higher.
  • Low inflation puts pressure on the ECB: Inflation in the euro-zone scratches the bottom, with 0.4% y/y in July. Core  inflation is at 0.8%. Despite a weaker euro, prices are not rising in the euro-zone. Will Draghi respond to this? The  wide measures  introduced in June are still fresh, so action is unlikely, but Draghi could certainly try to talk down the euro.

More: See how to trade the US services PMI with EUR/USD.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.