EUR/USD Aug. 5 – Honeymoon is over – back under 1.34
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EUR/USD Aug. 5 – Honeymoon is over – back under 1.34

EUR/USD  fell down below 1.34 and is now at the low range that characterized its trading during the previous week. Slightly weaker than expected PMIs in the old continent came out at the time of the drop, but the loss is more related to a re-emergence of fears towards the ECB meeting. Will the pair break to even lower ground? It depends on today’s important release in the US.

 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 August 5 2014 technical analysis fundamental outlook and sentiment

  • Below: 1.3365, 1.3325, 1.3295 and 1.32.
  • Above: 1.34, 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

  • 7:15  Spanish Services PMI. Exp. 55.1, actual 56.2 points.
  • 7:45 Italian Services PMI. Exp. 53.2, actual 52.8 points.
  • 8:00 Euro-zone services PMI. Exp. 54.4, actual 54.2 points.
  • 9:00 Euro-zone retail sales. Exp. +0.4%, actual +0.4%.
  • 13:45 US Markit Services PMI. Exp. 61 points.
  • 14:00 US  ISM Non-Manufacturing PMI. Exp. 56.6 points. See how to trade the figure with EUR/USD.
  • 14:00 US Factory orders. Exp. +0.6%.
  • 14:00 US  IBD/TIPP Economic Optimism. Exp. 46.2 points.

*All times are GMT.

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

EUR/USD Sentiment

  • Fear  returns: While the situation in Portugal’s BES was  quickly contained and poses no systemic risk, it goes to show that things can pop out of the blue and get out of control very quickly. This casts a doubt on how much the ECB’s stress tests can be reliable and prevent a crash.
  • German economy is slowing, but wages are on the rise: After a strong growth 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.
  • 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. Today’s ISM Non-Manufacturing PMI  usually serves as a pre-NFP hint. Nevertheless, the  employment component will be watched, and so will the prices.
  • 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.

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.