It’s back to business as the holiday season is over and the markets move into full gear. EUR/USD is steady in Monday trading, as the pair is just above the 1.36 line in the European session. In economic news, both Spanish and Italian Services PMIs improved in December. In the US, today’s highlight is ISM Non-Manufacturing PMI. The Senate holds a vote on the nomination of Janet Yellen for head of the Federal Reserve, which is expected to pass easily.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- EUR/USD edged lower in the Asian session, touching a low of 1.3572 and consolidating at 1.3580. The pair has crossed back above the 1.36 line in the European session.
Current range: 1.3525 to 1.3615.
Further levels in both directions: 
- Below: 1.3525, 1.3440, 1.34, 1.3320, 1.3240 and 1.3175.
- Above: 1.3615, 1.3675, 1.3710, 1.3800, 1.3832, 1.3940 and 1.4036.
- 1.3525 is a strong support level. 1.3440 is next.
- 1.3615 is providing weak resistance. 1.3675 follows.
EUR/USD Fundamentals
- All Day – German Preliminary CPI. Exp. 0.4%.
- 8:15 Spanish Services PMI. Exp. 51.1, actual 54.2 points.
- 8:45 Italian Services PMI. Exp. 48.9, actual 47.9 points.
- 9:00 Eurozone Final Services PMI. Exp. 48.9, actual 47.9 points.
- 9:30 Eurozone Sentix Investor Confidence. Exp. 9.7, Actual 11.9 points.
- 14:00 US Final Services PMI. Exp. 56.0 points.
- 15:00 US ISM Non-Manufacturing PMI. Exp. 54.6 points.
- 15:00 US Factory Orders. Exp. 1.8%.
- 22:30 US Fed Chairman Nomination Vote.
*All times are GMT
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- Spanish streak continues: Spanish data continues to sparkle in 2014. On Monday, Spanish Services PMI jumped to an impressive 54.2 points, up from 51.2 points the month before. This was well above the estimate of 51.1 points. Last week, Unemployment Change sparkled, dropping by 107.6 thousand, crushing the estimate of 24.3 thousand. This was the best reading ever in the month of December. Earlier in the week, Manufacturing PMI crossed above the 50-point level, indicating expansion.
- Unemployment Claims Unchanged: Last week’s Unemployment Claims were almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand. The markets will be keeping an eye on the year’s first Non-Farm Payrolls, which will be released later in the week. The NFP can impact the next Fed decision, after 2013 ended with QE tapering. While it was small, the Fed did indeed change policy, and this could have a significant positive impact on the US dollar. If employment releases continue to look solid, we could see further tapers in the near future.
- Flows now turning against the euro: The flows towards the end of 2013 went in favor of the euro and against the dollar. But as the excess liquidity needs to find a way, the flows are now changing direction and the euro has dropped sharply since January 1. EUR/USD has steadied as we put the holiday season behind us and begin the new trading week.
- Euro gets a new member: Latvia joined the Eurozone on January 1, becoming the 18th member of the bloc. With a population of just two million, Latvia will be one of the smallest economies in the Eurozone. Although many Latvians are not enthusiastic about adopting the continental currency, there were immediate benefits to the move, as the S&P and Fitch ratings agencies raised the country’s credit rating. There are now some 333 million people are now using the euro.
- Dollar outlook for 2014: Many analysts see the dollar strengthening in 2014, but the euro is certainly expected to give a fight. Here is one outlook: 2014 – Conditional Dollar Strength.
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