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EUR/USD  continued to improve on  yesterday’s post FOMC gains, as  market sentiment was positive for the euro  as French and German  PMIs were mostly positive.  However, market sentiment could quickly shift over worries about  the Greek crisis and a possible Grexit,  as the Greek PM meets with European leaders to request an extension of the bailout package. After a very quiet week in Europe, there are a host of Euro-zone releases today. In the US, highlights include Unemployment Claims and New Home Sales.

Here’s an update about technical lines, fundamental indicators and sentiment regarding EUR/USD.

EUR/USD Technical

  • Asian session: Euro/dollar  climbed as  high as  1.2553, and consolidated at 1.2536. In the European session, the pair continues to push upwards.
  • Current range: 1.2520 to 1.2623.

Further levels in both directions:    

  • Below: 1.2520, 1.2440, 1.24, 1.2360, 1.2330, 1.2250, 1.22, 1.2144, 1.2043, 1.20, 1.1876 and 1.17.
  • Above: 1.2623, 1.2670, 1.2743 and 1.2814.
  • Note that the pair enjoys uptrend support – it started in mid-July and the pair bounced off this line.
  • 1.2623 is a strong line of resistance.
  • 1.2520 is now providing support.

Euro/Dollar steady before Greek debt talks – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00 German Final GDP. Exp. 0.3%. Actual 0.3%.
  • 7:00 French Flash Manufacturing PMI. Exp. 43.7 points. Actual 46.2 points.
  • 7:00 French Flash Services PMI. Exp. 50.0 points. Actual 50.2 points.
  • 7:30 German Flash Manufacturing PMI. Exp. 43.5 points. Actual  45.1 points.
  • 7:30  German Flash Services PMI. Exp. 50.1 points. Actual 48.3 points.
  • 8:00  Euro-zone Flash  Manufacturing PMI. Exp.  44.2 points. Actual  45.3 points.
  • 8:00 Euro-zone Flash  Services PMI. Exp. 47.7 points. Actual 47.5 points.
  • 12:30 US Unemployment Claims. Exp. 365K.
  • 13:00 US Flash Manufacturing PMI. Exp. 51.3 points.
  • 14:00 Euro-zone Consumer Confidence. Exp. -22 points.
  • 14:00 US  New Home Sales. Exp. 363K See how to trade this event with USD/JPY.
  • 14:00 US HPI. Exp. +0.6%.
  • 14:30 US Natural Gas Storage. Exp. 40B.
For more events and lines, see the Euro to dollar forecast

EUR/USD Sentiment

  • Euro benefits from  healthy PMIs: For the most part, French and German PMIs posted strong numbers, and the Euro-zone PMIs were very close to the market estimate. This indicates stronger activity  and improving confidence in the services and  manufacturing sectors, and gave the euro a nice bounce  as it continues to  improve against the US dollar.
  • Fed hints at QE: The Fed released minutes of its most recent policy meeting, and there was a stronger hint of possible QE intervention.  The Fed indicated that  it remains supportive of more stimulus measures unless the economy shows signs of expansion. Heven’t we heard this talk before? Yes, but speculation about QE is sure to rise, especially if there are some weak releases out of the US. Talk of the Fed implementing QE is providing a further boost to  the  improving euro.
  • Greek PM seeks bailout “breather”: Greece successfully raised funds last week and avoided a default on the August 20th deadline, but much work remains to be done. Prime Minister Antonis Samaras is seeking an extension until 2016 to meet the bailout targets, while Germany and Greek creditors object to giving Greece more time and more money. Samaras  met with Euro-zone chief Jean-Claude Juncker in Athens on Wednesday, and will be hosted by French President Hollande and Chancellor Merkel later in the week. In the meantime, talks about a manageable Grexit are surfacing: this time from the ECB’s Jörg Assmussen, that echoed Eurogroup chief Juncker. Talks with the troika will continue in September. Greek Finance Minister Yannis Stournaras stated that the government was considering presenting the troika with an austerity plan with spending cuts of some 11.5 billion euros. See how to trade the Grexit with EUR/USD.
  • Markets react positively to report over ECB cap: The markets are abuzz over a report in Der Spiegel that the ECB intends to cap peripheral Euro-zone bond yields. After Spain finally submits its request (still awaited for more than two weeks), the ECB will buy bonds en masse, and will defend a preset yield like the SNB defends the EUR/CHF floor. Such a strong commitment will likely calm investors, as long as the ECB doesn’t have seniority. For its part, the ECB dismissed the Der Spiegel article, calling it “absolutely misleading”. Despite the ECB denial, the euro is up and Spanish bond yields are down.
  • Merkel pledges support for euro, ECB: German Chancellor Angela Merkel declared that “everything” must be done to save the euro, and also provided her support for the ECB’s proposal to buy the bonds of struggling countries. Under the ECB plan, tough conditions would be imposed on any country whose bonds the ECB would purchase. As well, that country would have to buy debt through Europe’s bailout funds before the ECB would act. With Merkel under pressure to take a tough line with Greece, her talks with Greek PM Samaras later this week promise to be anything but smooth.
  • Mixed signals make US economy hard to read: The US economy continues to zigzag and present a confusing picture to the markets. The manufacturing sector (as seen in the NY and Philly indices) is weak, and Existing Home Sales fell below the market estimate earlier this week. On the bright side, Retail sales came out better than expected and jobless claims remain at relatively low levels. The markets will be carefully watching key housing and employment data on Thursday.

 

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