EUR/USD is moving higher but seems to lack the conviction needed to make a real break above 1.33. It recovered from the strong ISM Non-Manufacturing PMI in the US, also thanks to a smaller than expected contraction in Italy. Could the thinner summer volume allow for stronger moves? We have more market moving events on both sides of the Atlantic.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- Asian session: Euro/dollar slid from the highs of 1.3270 to 1.3245 and later returned back up. All in, we are seeing classical range trading.
Current range: 1.3255 to 1.33.
Further levels in both directions: 
- Below: 1.3255, 1.3175, 1.31, 1.3050, 1.30, 1.2940, 1.2890 and 1.2840, 1.28 and 1.2750.
- Above: 1.33, 1.3350, 1.34, 1.3480 and 1.3520.
- 1.3255 is providing weak support. 1.31 is stronger.
- After a false break above 1.33, the line still remains very strong.
EUR/USD Fundamentals
- 8:00 Italian Industrial Production. Exp. +0.5%, actual +0.3%.
- 9:00 Italian GDP. Exp. -0.4%, actual -0.2%.
- 10:00 German factory orders. Exp. +1.1%. Actual: +3.8% – excellent result isn’t enough to push
- 12:30 US trade balance. Exp. -43.1 billion. Has impact on GDP.
- 14:00 US JOLTS number. Exp. 3.91 million. This is a Bernanke favorite.
- 14:00 IBD/TIPP Economic Optimism. Exp. 47.9 points.
- 17:00 FOMC member Charles Evans talks. He is a dove.
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- Italy completes two years of recession: The euro-zone’s third largest contracted for the 8th consecutive quarter, but at least the level of contraction was lower: only 0.2% instead of 0.4%. Italy has a high debt-to-GDP ratio and has a gentle political situation. German and French is due next week and a positive number is needed to show there is light at the end of the tunnel.
- Encouraging US numbers: The largest US sector, services, enjoyed strong growth according to ISM, with most sectors reporting growth, the headline figure standing at a high of 56 and the employment component in positive ground. This joins the strong manufacturing PMI. However, the weak Non-Farm Payrolls report from Friday is still weighing on the dollar, as it leaves the QE tapering question quite open.
- Fed talk: After the Fed made no real policy changes and after Bernanke said that the Fed is not on a “preset course”, various officials will weigh in. It is important to note who is a hawk, asking for immediate tapering (i.e. Fisher), and who is a dove, that wants QE forever, like Evans. If we hear hawkish notes from a dove or dovish notes from a hawk, that will certainly move markets.
- Downward bias from the ECB: While Mario Draghi was relatively upbeat and acknowledged the green shoots in Europe, the bias certainly remains dovish, and yet another ECB member reminded us that rates could go down from here, and that the ECB still “has more ammunition”.
More technical analysis: EURUSD: Continues To Retain Its Broader Upside Tone
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