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Euro dollar was steady  following its sharp drop following the release of the minutes of the FOMC meeting last month.  There are fresh concerns over the sovereign debt crisis in the Euro-zone  after  a weak Spanish bond auction. The markets will be closely watching the release of US Unemployment Claims, today’s key release.

Here’s an update on technicals, fundamentals and what’s going on in the markets.

EUR/USD Technicals

  • Asian session: The overnight session was quiet, as EUR/USD consolidated at 1.3164. The pair has weakened  in the European session, trading at 1.3118.
  • Current range: 1.31 to 1.3165.    
  • Further levels in both directions: Below: 1.3080, 1.30, 1.2945, 1.2873 and 1.2760.
  • Above: 1.3212, 1.33, 1.3437, 1.3486, 1.3550 and 1.3615.
  • 1.3165 is immediate resistance, and the pair  could test  the support level of 1.3080.

Euro/Dollar is sliding on new  concerns – click on the graph to enlarge.

EUR/USD Fundamentals

  • 10:00 German Industrial Production. Exp. -0.3%.
  • 11:30  Job Cuts Announcements. Exp. 0.1%.
  • 12:30 US Unemployment Claims. Exp. 355K.
  • 14:30  Natural Gas Storage. Exp. 35B.

For more events later in the week, see the Euro to dollar forecast

EUR/USD Sentiment

  • China slowdown easing?: The markets cheered the Chinese Manufacturing PMI figures, which climbed to an 11-month high of 53.1, above market forecasts. Further strong data out if China would raise hopes about renewed activity in the Asian giant’s economy.
  • European Recession Concerns: The euro strengthened after euro zone finance ministers agreed to strengthen the region’s debt firewall on Friday, but concerns remained over whether the measures would be enough to prevent contagion to other Euro-zone economies, notably Spain. As expected, the ECB left interest rates unchanged at 1%.
  • Spanish worries: Citigroup chief economist said that the chance of a Spanish default is now higher. This joins the persistent rise in Spanish yields, and the weak Spanish auction.  Europe remains very fragile.
  • The continuing retreat in European manufacturing. All of the major European economies recorded a PMI reading of below 50 last month. In France, for example, the final reading for March was revised down very sharply from an already very weak preliminary figure. In contrast, in the US, PMI figures have been comfortably above 50, including the Non-Manufacturing PMI released earlier this week.  
  • FOMC Dampens Likelihood of Interest Rate Hike: The FOMC March meeting minutes indicated that the Fed  will not launch a third round of quantitative easing unless the rate of growth falters or inflation drops below the central bank’s 2% targeted rate. The news had a strong effect on the currency markets, as the Euro has  fallen over 1% against the dollar since the FOMC release.