EUR/USD August 30 – Steady As Syrian Concerns Ease

EUR/USD has steadied after sharp losses on Thursday, as markets jitters  over a US strike against Syria have eased. The pair is trading in the mid-1.32 range in  Friday’s European session.  On Thursday, US releases looked good, as GDP posted a strong gain and Unemployment Claims were very close to the forecast. Friday is busy, but there  are  no major  releases out of the Eurozone or the  US. In  the Eurozone, German Retail Sales declined sharply while Italian Unemployment numbers showed some improvement. Over in the US, we’ll get a look at inflation, PMI and consumer confidence data later in the day.  

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

EUR/USD Technical

• In the Asian session, EUR/USD  was a quiet,  touching a high of  1.3255 line and  consolidating at  1.3248.  The pair is unchanged in the European session.

Current range: 1.3240 to 1.33.

Further levels in both directions:  

• Below: 1.3240, 1.3175, 1.31, 1.3050, 1.30 and 1.2940.
• Above: 1.33, 1.3350, 1.3415, 1.3450, 1.3520, 1.3590 and 1.37.
• 1.3240 is  under strong pressure  from the pair.  1.3175 is next.
• 1.3300  continues to provide resistance. 1.3350 follows.

EUR/USD Fundamentals

• 6:00  German Retail Sales. Exp. 0.5%, actual  -1.4%.
• 8:00 Italian Quarterly Unemployment Rate. Exp. 12.1%, actual 12.1%.
• 8:00 Italian Monthly Unemployment Rate. Exp. 12.2%, actual 12.0%.
• 9:00 Eurozone CPI Flash Estimate. Exp. 1.4%.
• 9:00 Eurozone Unemployment Rate. Exp. 12.1%.
• 9:00 Italian Preliminary CPI. Exp. 0.2%.
• 12:30 US  Core  PCE  Price Index. Exp. 0.2%.
• 12:30 US  Personal Spending. Exp. 0.3%.
• 12:30 US  Personal Income. Exp. 0.3%.
• 13:00 US FOMC Member James Bullard Speaks.
• 13:45 US Chicago PMI. Exp. 53.2 points.
• 13:55 US  Revised UoM Consumer Sentiment. Exp. 81.2 points.
• 13:55 US  Revised UoM Inflation Expectations.

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

EUR/USD Sentiment

• Euro steadies as Mid-East tensions recede: The  markets reacted  nervously  this week to a likely  US  strike against Syria, after a chemical attack in the war-torn country killed  hundreds of civilians.  The euro dropped sharply, losing about 150 points  over the course of the past two days. However, there is now speculation that the attack could be postponed until mid-September. On  Thursday, the British  parliament  voted by a narrow margin  not to join any US attack on Syria. This complicates President Obama’s attempts to solidify a  coalition before taking military action.  The  markets have steadied and the euro is holding its own against the dollar in Friday trading.  
• GDP, Employment numbers improve:  US  releases  have zigzagged this week, but Thursday’s key releases looked solid. Preliminary GDP  posted another strong  gain of 2.5% in Q1, after a 2.4%  rise  in Q1.  Unemployment  Claims dropped slightly  to 331 thousand, just shy of  the  estimate of 330 thousand.  The strong numbers will likely increase speculation that the Federal Reserve could taper QE in September rather than later in the year, so we could see the dollar post gains against the euro and other currencies.
• German data sputters: German data continues to look weak. On Thursday, Unemployment Change jumped from -7 thousand in July to 7 thousand in August. The markets had expected another decline of -5K.  Friday brought no  relief as  Retail Sales declined 1.4%, well off  the estimate of a 0.5% gain.  National elections are just a few weeks away, and domestic economic problems  could hurt Chancellor Angela Merkel,  who is  seeking a third straight term in office.
• Fed  mum over  QE tapering timing: The Federal Reserve has kept very  quiet  about when it might taper QE, but recent statement from Fed policymakers underscore the divisions regarding the timing of such a dramatic move. Dennis Lockhart, head of  the Atlanta Fed, said that tapering could start in September, but only if  US data justified such a move.  There was a more hawkish  statement from James Bullard, head of the St. Louis Fed. Bullard said that there was no need  for the Fed to rush  into QE tapering.  Meanwhile, the uncertainty over QE tapering has boosted the US dollar, raised the yields on US treasury bonds and  led nervous investors to pull billions of dollars out of emerging markets. With September just around the corner,  we could see strong volatility in the markets as speculation over QE heats up.