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The euro continues to trade at high levels, as EUR/USD  remains above the 1.37 on Friday, The euro managed to shrug off weak data out of the Eurozone on Thursday, as PMIs  did not impress and inflation indicators  posted declines. In the US,  Unemployment Claims and Core CPI met expectations, but the Philly  Fed Manufacturing Index  slumped to a nine-month low.  Friday is quiet on the release front, with the markets keeping a close eye on US Existing Home Sales. There are no Eurozone events on the schedule.

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

EUR/USD Technical

  • EUR/USD  has been rangebound in the  Asian and European sessions, trading slightly above the 1.37 line.

Current range: 1.37 to 1.38

Further levels in both directions:     EUR USD Daily Forecast Feb.21st

  • Below: 1.37, 1.3650, 1.3580, 1.3515, 1.3450, 1.34, 1.3320, 1.3295, 1.3175, 1.31 and 1.3050.
  • Above: 1.38, 13915 and 1.40.
  • On the downside, 1.37  is under pressure. 1.3580 is stronger.
  • 1.38 is the next resistance line.

 

EUR/USD Fundamentals

  • 15:00 US Existing Home Sales. Exp. 4.73M.
  • 18:45 FOMC Member Richard Fisher Speaks.

*All times are GMT

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

EUR/USD Sentiment

  • Mixed numbers out of the US: Unemployment Claims dropped slightly last week, coming in at 336 thousand. This was just shy of the estimate of 335 thousand. After some recent weak releases on the employment front, the markets will be pleased with this release. Meanwhile, inflation indicators continue to raise concerns, as Core CPI posted a paltry gain of 0.1% for the second straight month. Weak inflation levels are indicative of weak economic growth and could  spell trouble for the US recovery. On the manufacturing front, the Philly Fed Manufacturing Index slumped  badly, posting a decline of -6.3 points, compared to +9.4 points a month earlier. This  marked the first reading below the zero level since  January 2013. US numbers have not looked strong of late, and this has helped the euro hold its ground above the 1.37 level.
  • Fed may adjust forward guidance:  This week’s Federal Reserve minutes indicated that interest rates are unlikely to rise,  even if unemployment drops to 6.5%. Previously, the Fed had said  it would consider  raising rates at the 6.5% threshold, but with unemployment falling faster than expected,  Fed policymakers agreed  that it would “soon  be appropriate” to revise the Fed’s forward guidance regarding interest rate levels.  The minutes also  indicated  that the Fed will likely continue  trimming QE,  barring any downturns in the economy.
  • Euro PMIs disappoint:  PMIs  out of the Eurozone  were  mostly weak in January.   French Service and Manufacturing PMIs remain in contraction mode, while the Eurozone numbers fell short of their estimates. German numbers were mixed, as Manufacturing PMI was well short of the estimate,  while Services PMI  managed to beat the forecast. These  weak figures from the Eurozone’s two largest  economies do not bode well  for  the Eurozone and the euro responded with  modest losses.
  • Economic Sentiment releases disappoint: Confidence in the outlooks for the German and Eurozone  economies weakened in January. German ZEW Economic Sentiment slid to a three-month low, dropping to 55.7 points in January, compared to 61.7 a month earlier. The estimate stood at 61.3. The Eurozone reading followed suit, dropping from 73.3 to 68.5 points, way off the estimate of 73.9. Although these levels are relatively high, the fact that institutional investors  and analysts are less optimistic is a reason for concern, and a slowing down of the German locomotive is the last thing the troubled Eurozone needs.
  • ECB official hints at negative rates: The head of the Eurogroup, Dutch finance minister Joeren Dijsselbloem, said that that some say the value is too strong. His words join  an ECB member that stated that the central bank is considering negative rates very seriously. These words weighed on the euro, which has since recovered. In addition, the Bank’s monthly bulletin cut inflation forecasts from 1.5% to 1.1% in 2014. ECB President Draghi seemed confident that things will sort themselves out, but  another fall in inflation could still trigger a move in March.

 

More:  Analysis: ECB expects the situation to sort itself out, but things could still worsen