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EUR/USD  fell lower on a Sunday gap and could never retake the previous levels. Will the attempts to talk down the euro succeed? PMIS and a speech from ECB president Mario Draghi are the key events.  Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.

Draghi made his mark once again: he  tied further monetary stimulus to the value of the euro. His weekend comments opened a gap lower that was never closed. Pressure on the euro also came from the  miss in the German ZEW figure  and also from the  downwards revision of core CPI  for March, which is now at its lowest level post-crisis level. Data in the US was mostly positive, with an  encouraging jobless claims  figure and  better than expected retail sales, although more evidence is needed to convince everybody in the spring bounce theory.

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EUR/USD daily chart with support and resistance lines on it. Click to enlarge:

EURUSD April 21 25 2014 technical daily forex chart euro dollar trading forex

 

  1. Consumer Confidence: Tuesday, 15:00.  Consumer confidence in the  euro zone  improved beyond expectations in March, reaching minus 9 points after posting minus 12.7 points in February. Economists expected a more modest advance to minus 12 points. The positive trend indicates the euro-area is on a recovery path. No change is expected this time.
  2. Manufacturing and services PMIs: Wednesday. The Eurozone’s manufacturing and services sectors mildly declined in Match. The Manufacturing sector dropped to 53 following 53.2 registered in February and the services sector declined by 0.2 points to 52.4. However, both figures remained in expansion territory with a continuous rise in the services sector activity, indicating business expansion. Meanwhile, business activity in France’s manufacturing sector edged up to 51.9 in March, from 49.7 in February indicating expansion. The release was stronger than the 49.8 anticipated by analysts. Likewise, the Services sector climbed to 51.4, from 47.2 in February, posting the highest reading in 26 months, beating expectations for a 47.8 reading. Improving conditions domestically and abroad contributed to expansion. In Germany, both manufacturing and services activity weakened in March compared to February, The manufacturing sector declined to 53.8, form 54.8 in the previous month and the services, ticked down slightly to 54.0, compared to 55.9 in the previous month Both readings came in below market consensus. French manufacturing sector is expected to reach 51.9 and services are expected to remain unchanged at 51.5. German manufacturing is predicted to rise to 53.9 and the services sector is expected to advance to 53.5. The Eurozone Manufacturing is expected to remain at 53 points while the services sector is expected to rise to 52.7  points.
  3.  German Ifo Business Climate: Thursday, 9:00. German business sentiment, edged down to 110.7 in March following four months of increases. The decline was related to worries from EU sanctions on Russia and low inflation. The current conditions gauge edged up to 115.2 from a prior 114.4, compared to forecast of 114.5.  The expectations measure retreated to 106.4 from a prior of 108.3, lower than projection of 107.7. Nevertheless, the German government upgraded its growth forecast by 0.3% to 1.9% expansion this year after a strong start of 2014. Business sentiment is expected to decline to decline to 110.5.
  4. Mario Draghi speaks: Thursday, 10:00. ECB President Mario Draghi will speak at a conference in Amsterdam. He may comment on the low inflation in the Eurozone. Market volatility is expected.    We have seen his heavy hand on the euro  and we might see this happen again
  5. Belgian NBB Business Climate: Friday, 14:00. Belgian business confidence, dropped in March to minus 4.4 following minus 4 posted in the previous month, amid pessimism regarding the service sector activity. Sentiment in manufacturing was marginally lower. Belgian business confidence is expected to improve further to minus 2.3.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar began the trading week with a gap lower and attempts to recover met resistance at 1.3865, a new line that didn’t appear  last week. Also a  dip under 1.38  was not sustained.

Technical lines from top to bottom:

1.4105 provided support for the pair during August 2011. It is followed by 1.4055, which worked as a lower line in that period of time.

The all important round number of 1.40 is of high political importance. We have seen how  getting close to the line triggered a critical comment that sent it down. Below, the 2014 high of  1.3964  will be closely watched.

The 2013 high of 1.3895 is a pivotal line in the high range.  1.3830, which was a long serving 2013 peak comes back into the focus after capping the pair in March 2014 and serving as a clear separator several times.

The round number of 1.38 is is weakening, but still important. It served as resistance in December.  1.3740, which provided some support at the end of 2013 is now key support to the downside. The round number of 1.37, is another support line after capping the pair in December.

1.3650  provided support in December and worked as resistance in September 2013, and is also a significant line. Also the February rally fell short of this line. Below,  1.3560  worked as good support twice during February 2014.

The January 2014 low of 1.3515 provides minor support on the way down. 1.3450 worked as resistance in August 2013 and as support in September and October. It is now a key line on the downside.

Broken uptrend support

The pair ran higher along a steep uptrend line. This was clearly broken with the Sunday gap.

I remain bearish on EUR/USD

The clouds of deflation are gathering above the euro-zone  and the ECB does not like it.  Draghi could keep the pressure  on the common currency once again. EUR/USD is still too close to 1.40, the line in the sand for the central bank. In addition, German data could miss once again. On the other side of the pond, US data surprises to the upside more often. Even if the rebound only began late in March and not beforehand,  evidence from April already looks very encouraging.

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