EUR/USD April 30 – Euro Posts Gains On Strong Eurozone

EUR/USD  has shown some fluctuation on Wednesday, as the pair has rebounded and is trading above the 1.38 line in the European session. On the release front, today’s schedule is crowded. German numbers were mixed, as Retail Sales slipped but unemployment numbers  were strong. Eurozone CPI Flash Estimate  posted a gain and met expectations. In the US, today’s key releases are ADP Non-Farm Payrolls as well as Advance GDP. As well, the Federal Reserve will release a policy statement, and the Fed is widely expected to trim QE by $10 billion.

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

EUR/USD Technical

• EUR/USD  was steady  in the  Asian session, trading close to the 1.38 line. The  pair is showing sharp movement in the European trading. After dipping below the 1.38 line, the pair has rebounded strongly and is trading in the mid-1.38 line.

Current range: 1.3830 to 1.3894.

Further levels in both directions:    

• Below: 1.3830, 1.3785, 1.3740, 1.37, 1.3650 and 1.3560, 1.3515 and 1.3450
• Above: 1.3865, 1.3905, 1.3964, 1.40, 1.4055 and 1.4105
• On the upside, 1.3865 is under strong pressure.  1.3905  follows.  
•  On the downside, 1.3830  is fluid. 1.3785 is next.

EUR/USD Fundamentals

• 6:00 German Retail Sales. Exp. -0.6%, actual -0.7%.
• 6:45 French Consumer Spending.  Exp. 0.4%, actual 0.3%.
• 7:00 Spanish Flash GDP.  Exp. 0.4%, actual 0.4%.
• 7:55 German Unemployment Change. Exp.-10K,  actual -25K.
• 8:00 Italian Monthly Unemployment Rate.  Exp.13.0%,  actual 12.7%.
• 8:57 French 10-year Bond Auction.  Actual. 2.0%.
• 9:00 Eurozone CPI Flash Estimate.  Exp. 0.8%, actual 0.7%
• 9:00 Italian Preliminary CPI.  Exp. 0.1%, actual 0.2%.
• 12:15 US ADP Nonfarm Employment Change.  Exp. 203K.
• 12:30 US Advance GDP.  Exp. 1.2%.
• 12:30 US Advance GDP Price Index.  Exp. 1.6%.
• 12:30 US Employment Cost Index. Exp.  0.5%.
• 13:45 US Chicago PMI.  Exp. 56.6 points.
• 14:30 US Crude Oil Inventories.  Exp. 1.3M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate.  Exp. <0.25%.

*All times are GMT For more events and lines, see the  Euro to dollar forecast.

EUR/USD Sentiment

• German numbers point in all directions: German numbers were a mix on Wednesday. Retail Sales, the primary gauge of consumer spending, weakened in March, coming in at -0.7%, marking a three-month low. This was slightly lower than the estimate of -0.6%. On the bright side, Unemployment Change dropped by 25 thousand, much better than the estimate of -12 thousand. Meanwhile, Eurozone CPI Flash Estimate posted a gain of 0.7%, just short of the estimate of 0.8%. The euro has shown some movement in the European session, and has rebounded after dipping below the 1.38 line earlier.
• Another Fed taper expected: The markets are keeping a close eye on the Federal Reserve, which will issue a policy statement later in the day. The Fed is expected to trim QE by another $10 billion, which would reduce the asset purchase scheme to $45 billion each month.  If US numbers remain steady, the Fed plans  to wind up QE before the end of 2014, at  which time the guessing game of when interest rates might rise will begin in earnest. Meanwhile,  further tapers to QE represent a  vote of confidence in the US economy, so the greenback could  post gains against the major currencies  following another trim.
• US housing numbers rebound: US housing numbers were weak last week, but it was a different story on Monday, as Pending Home Sales soared in March. The key indicator jumped 3.4%,  crushing the estimate of 1.0%. This marked its biggest monthly gain since last May. The indicator has posted mostly declines in recent readings, so the strong gain was welcome news. Meanwhile, US consumers  appear to be content, as the  UoM Consumer Sentiment jumped to 84.1 points in March, beating the estimate of 83.2. It marked the  indicator’s highest level since June. Strong consumer optimism should  translate into  higher consumer  spending, which is critical for US economic growth.
• Draghi remarks  weigh on  euro: For the second time, ECB head Mario Draghi tied between the value of the euro and future monetary policy. This mention comes as the euro remains firm not only against the dollar but also against the Chinese yuan which is depreciating. EUR/CNY is at the highest since 2011. The ECB has drawn its “line in the sand” at the 1.40 level, and we can expect more rhetoric from Draghi if the euro gains further ground. The ECB is also watching the inflation situation carefully, with the danger of deflation a growing concern.