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EUR/USD is steady as we start the new trading week.  In  Monday’s European session, the pair is trading around the 1.3030 line. The  euro  rocketed in mid-week, gaining about 350 points as the Federal Reserve indicated that QE tapering was not imminent.  On Friday, US PPI hit a nine-month high, but UoM Consumer Sentiment missed the estimate.  Taking a look at Monday’s events, there are no releases out of the Eurozone today. In the US, there are two key releases – Retail Sales and Core Retail Sales. The markets are anticipating improved numbers from both.

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

EUR/USD Technical

  • Asian session: Euro/dollar was very quiet to start off the week.  The pair  stayed close to the 1.3050 line  and consolidated at 1.3064. In the European session,  Euro/dollar has edged lower.

Current range: 1.30 – 1.3050.

Further levels in both directions:   EUR USD Daily Forecast July 15th

 

  • Below: 1.30, 1.2940, 1.2890, 1.2840, 1.28, 1.2750, 1.27, 1.2660 and 1.26.
  • Above: 1.3050, 1.3100, 1.3160, 1.32, 1.3255, 1.3350 and  1.34.
  • 1.30  continues to  provide weak support.  1.2940 is next.
  • On the upside, 1.3050 is under pressure. The next line of resistance is at the round number of 1.31.

EUR/USD  continues to post modest losses  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 12:00  US FOMC  Daniel Tarullo Speaks.
  • 12:30 US Core Retail Sales. Exp. 0.5%.
  • 12:30 US Retail Sales. Exp. 0.7%.
  • 12:30 US Empire State Manufacturing Index. Exp. 5.2 points.
  • 14:00 US Business Inventories. Exp. 0.2%.

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

EUR/USD Sentiment

  • US Consumer Sentiment Misses Estimate: The markets would have liked to wrap up last week with a strong US release, but it was not to be, as UoM Consumer Sentiment disappointed. The key indicator did rise from 82.7 points to 83.9, but this fell well short of the estimate of 85.3 points. However, the markets were in a forgiving mood on Friday,  and the dollar was not hurt by these numbers.  The reason? Analysts noted that the indicator  remains at a high level, even though it missed the forecast.  As well, the release noted that inflation  is expected to rise, and expectations  were up sharply.
  • Euro  retracts after spectacular gains: The euro took full advantage of broad dollar weakness last Wednesday, as the Federal Reserve poured cold water on expectations that QE tapering was just around the corner. FOMC minutes from the June policy meeting indicated that Federal Reserve policymakers  were closely split over when to scale down the current round of QE, in which the Fed purchases $85 billion in assets each month. About half of the policymakers favor commencing tapering before the end of 2013, while others feel that the labor market  is still too weak. The dollar was broadly weaker as a result, and the euro took full advantage,  posting gains of  some  350 points. However, the euro has since coughed up some of those gains as the dollar continues to rebound. Is 1.30 the next stop for the greenback, or will the euro rebound?
  • Bernanke comments send dollar downwards: After the FOMC minutes were released, Fed Reserve chair Bernard Bernanke gave a speech in which he said that the Fed would  maintain accommodative monetary policy for the foreseeable future, due to  low levels of inflation and the high US unemployment rate. A careful reading of Bernanke’s doesn’t reveal anything new, yet the markets did react negatively to the speech, and the dollar lost more ground as a result. If US numbers, notably employment, point upwards, we can expect more pressure on the Federal Reserve to take action and tighten QE.
  • ECB says low rates to continue:  The ECB continues to send out signals that  interest rates will be maintained or even cut.  On Thursday, the ECB  stated in its monthly bulletin that it  expects  rates to be maintained over even lowered, but remained  “flexible”  about its low rate policy, with inflation being a key factor in any future moves. ECB policymaker Jens Weidmann echoed these sentiments. saying that the ECB’s monetary policy depended on economic conditions in the Eurozone. Low  rates are bad for the euro, as  many investors  could end up parking their funds elsewhere if the rates  are more attractive elsewhere.