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EUR/USD  continues to struggle and extends its losses on the last day of the week and of the month. Inflation data continues to weigh on the single currency, and also Germany seems unable to pull the pair forward, even US figures aren’t perfect, to say the least. Data coming from the US and last minute flows could result in an exciting session.

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

EUR/USD Technical

  • EUR/USD  remained depressed in the Asian session and traded under 1.3560.

Current range: 1.2515 to 1.3580

Further levels in both directions:

EURUSD Technical Analysis January 31 foreign exchange currencies

  • Below: 1.3515, 1.3450, 1.34, 1.3320, 1.3240, 1.3175 and 1.31.
  • Above: 1.3580, 1.3650, 1.37, 1.3800, 1.3832 and  1.3940.
  • 1.3515 successfully survived the first test, and is strong support.
  • 1.3580 is weak resistance before 1.3650.

EUR/USD Fundamentals

  • 7:00  German Retail Sales. Exp. +0.2%. Actual -2.5%.
  • 7:45 French Consumer Spending. Exp. -0.2%. Actual -0.1%.
  • 10:00 Euro-zone CPI Flash Estimate. Exp. +0.9%, actual only +0.7%, core inflation: 0.8%.
  • 10:00 Euro-zone unemployment rate. Exp. 12.1%. Actual 12.1%.
  • 13:30 US  Personal Spending. Exp. +0.2%.
  • 13:30 US Personal Income. Exp. +0.2%
  • 13:30 US Employment Cost Index. Exp. +0.4%.
  • 13:30 US Core PCE Price Index. Exp. +0.1%
  • 14:45 US Chicago PMI. Exp. 59.8 points.
  • 14:55 US  UoM Consumer Sentiment. Exp. 81.1 points.
  • 18:15 US FOMC member Richard Fisher speaks (hawk).

*All times are GMT For more events and lines, see the  Euro to dollar forecast.

EUR/USD Sentiment

  • Weak euro-zone  inflation: Euro-zone inflation remains low, with the headline figure at the lows of October: 0.7%. While the German figures already provided a hint, the publication hurt the euro. Core inflation is at 0.8%, still higher than the lowest level of 0.7% seen in December. Nevertheless, it seems that if the euro doesn’t fall on its own, the ECB could act in March, but setting a negative deposit rate, triggering a fall of the euro and an escape from deflation.
  • US enjoys strong growth, but with a caveat: US GDP growth came out at 3.2% in Q4, as expected. However, the big contribution of inventory buildup is not a good sign: inventories could be depleted later on. In addition, weak durable goods orders and a fall in pending home sales show that the road is very bumpy.
  • Fed Taper, Round 2:  .The Federal Reserve cut its stimulus program by another $10 billion, lowering QE to $65 billion each month. Outgoing Fed chair Bernanke  has indicated that the Fed plans to  wind up QE  by the end of  the year, so we can expect  further tapers, barring any surprise downturns in the US economy. The decision was anticipated, and the issues in emerging markets didn’t stop the move, nor did the weak NFP.
  • Emerging markets crisis: The taper, as well as issues in local economies, is taking its toll on the emerging markets such as Brazil, India, China, Turkey, South Africa and Indonesia. The efforts to strengthen the local currencies has had limited success, and some estimate that the outflow of money from these nations has only just begun. Flows out of these countries and into Europe could keep the euro bid.
  • German  unemployment tumbles, retail sales fall: The German locomotive  continues to pick up speed, much to the delight of the markets. This time it was Unemployment Change, which sparkled in December with a drop of 28 thousand, crushing the estimate of a drop of 5 thousand.  This was the indicator’s best showing since March 2011. The Unemployment Rate  stayed pegged at 6.8%. Earlier in the week, Consumer Climate and Ifo  Business Climate rose, indicating that German businesses and consumers are optimistic about the economy as we begin 2014.  Germany is the Eurozone’s largest economy, and the region will need Germany to lead the way to an economic recovery. However, not all is rosy, especially with the big fall in retail sales.

More:  EURUSD: Hesitates Above Its Key Support