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The new month of August has greeted the markets with plenty of action, as EUR/USD  is showing some volatility in Thursday trading. The  pair crashed below the 1.33 line  and is trading in  low 1.32 territory. In Eurozone releases,  Italian and Eurozone Manufacturing PMIs  beat  their estimates, but Spanish PMI fell below the 50-point level.  Later today, the ECB releases its rate statement, with a follow-up press conference hosted by Mario Draghi. In the US, there are two  major releases – Unemployment Claims and ISM Manufacturing PMI. On Wednesday, the Federal Reserve said it would continue with the present level of QE.

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

EUR/USD Technical

  • Asian session: Euro/dollar  lost ground, dropping below the 1.33 line. The pair, touched a low  of 1.3266  and consolidated at 1.3273. The  downward trend continues  in the European session, with  EUR/USD trading around 1.3240.

Current range: 1.3175 to 1.3255.

Further levels in both directions:     EUR USD Daily Forecast Aug 1st

 

  • Below: 1.3175, 1.31, 1.3050, 1.30, 1.2940, 1.2890 and 1.2840, 1.28 and 1.2750.
  • Above:    1.3255, 1.33, 1.3350, 1.34, and 1.3520.
  • 1.3175 is providing support. This is followed by 1.31.
  • 1.3255  has reverted to a weak resistance line. The round number of 1.33 is next.

EUR/USD Fundamentals

  • 7:15  Spanish Manufacturing PMI, exp. 50.7, actual 49.8 points.
  • 7:45  Italian Manufacturing PMI, exp. 49.8, actual  50.4 points.
  • 8:00  Eurozone  Final  Manufacturing PMI, exp. 50.1, actual  50.3 points.
  • 11:30 US Challenger Job Cuts.
  • 11:45 ECB Minimum Bid Rate, exp. 0.50%, actual 0.50%.
  • 12:30 ECB Press Conference.
  • 12:30 US Unemployment Claims, exp. 346K.
  • 13:00 US Final Manufacturing PMI, exp. 52.1 points.
  • 14:00 US ISM Manufacturing PMI, exp. 52.1 points.
  • 14:00 US Construction Spending, exp. 0.4%.
  • 14:00 US ISM Manufacturing Prices, exp. 53.0 points.
  • 14:30 US Natural Gas Storage, exp. 55B.
  • All Day:  US Total Vehicle Sales, exp. 15.8M.

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

EUR/USD Sentiment

  • Fed offers more of the same: The US Federal Reserve released a policy statement on Wednesday, but there wasn’t any dramatic news out of Washington. The Fed stated that it would continue with the present level of QE, namely $85 billion in asset purchases each month, and gave no indication about when it might taper QE. The Fed could take action in September, and the speculation and uncertainty will likely cause volatility so long as the Fed keeps the markets in the dark about its plans. The Federal Reserve also added that  the US economy was growing at  a “modest” pace and voiced some concern about a rise in inflation.
  • Markets eye ECB rate announcement:  The markets is keeping a  close eye on the ECB, as the central bank sets the new benchmark interest rate later on Thursday.  However, it is the follow-up press conference, starring ECB head Mario Draghi, that has  moved the markets recently.  Will Draghi again make some comments that shake up the euro? Analysts are betting that the rate will remain the same, as rates are already so low that a reduction would not have a strong impact. The ECB is more likely to focus on non-conventional monetary measures, such as negative deposit rates and forward guidance. If Draghi mentions  that the ECB is considering these steps, we could see the euro lose some ground.
  • Italian, Eurozone PMIs climb above 50: Manufacturing PMIs were released on Thursday, and the reviews were mixed. Italian Manufacturing PMI pushed above  the 50 level for  the first time in two years,  rising from 49.1 to 50.4 points. The 50  threshold separates between contraction and expansion.    It was an almost identical story with  Eurozone Final Manufacturing PMI, which jumped  from 48.8 to 50.3 points. This was its first  reading above 50 since August 2011. Spanish Manufacturing PMI couldn’t keep pace, and dropped from 50.0 to 49.8 points.
  • Employment picture brightens, a bit: The unemployment rate in the Eurozone remained at 12.1%, which was a notch better than the estimate of 12.2%. In Italy, the unemployment rate edged lower, from 12.2% to 12.1%. These numbers won’t make headlines, but point to a stabilizing of the employment picture in the Eurozone. With Eurozone economic releases showing some improvement recently, the markets are hoping that this positively impacts on the labor market as well.
  • German numbers show improvement: The markets have been busy analyzing this week’s German releases, and the news is mostly positive. GfK Consumer  Climate hit 7.0 points, a multi-year high,  while Preliminary CPI posted a nice gain of 0.5%. Unemployment Change looked sharp, dropping by 7 thousand.  This easily beat the  estimate of  -1 thousand. The fly in the ointment was Retail Sales, which  declined by  1.5%, its worst showing since January. With general elections in Germany  scheduled for  September, every economic release has added significance and will be under the microscope as the election campaign heats up.