EUR/USD has lost ground on Tuesday, as the pair has again broken below the 1.35 line. Will the pair consolidate below this level? Continuing violence in Gaza and Ukraine has lent support to the safe-haven US dollar. On the release front, it’s a busy day in the US, highlighted by Core CPI and Existing Home Sales. There are no Eurozone events on the schedule.
Here is a quick update on what’s moving the pair.
- EUR/USD moved lower in the Asian session. This movement continued in the European session and the pair broke below key resistance at 1.35.
- Current range: 1.3450 to 1.35.
Further levels in both directions: 
- Below: 1.3450, 1.34, 1.3375 and 1.33.
- Above: 1.35, 1.3550, 1.3585, 1.3610, 1.3650 and 1.3677.
- 1.3450 is providing weak support. 1.34 is next.
- The round number of 1.35 an immediate resistance line. 1.3550 follows.
EUR/USD Fundamentals
- 12:30 US Core CPI. Estimate 0.2%.
- 12:30 US CPI. Estimate 0.3%.
- 13:00 US HPI. Estimate 0.4%.
- 14:00 US Existing Home Sales. Estimate 4.98M. See how to trade this event with EUR/USD.
- 14:00 US Richmond Manufacturing Index. Estimate 5 points.
*All times are GMT.
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- Ukraine tensions continue: The blame game around the downing of MH17 continues with the Ukrainians and the Russians blaming each other. In addition, there are accusations of tampering with the evidence and looting of the belongings of the victims. Meanwhile, sporadic fighting continues between the separatists and Ukrainian forces in Eastern Ukraine. The Europeans are threatening stronger sanctions against Russia, and escalating tensions within Europe does not bode well for the euro.
- Gaza violence escalates: The fighting has in Gaza between Israel and Hamas has intensified as Israel’s land offensive continues. As long as oil production in other countries is not disturbed, there will be no impact on the markets. Fighting in Gaza between Hamas and Israel continues to rage, as the international community scrambles to try to get the two sides to agree to a cease fire.
- Mixed US data: On the job front, things are improving quite nicely, with another drop in jobless claims and continuing claims. However, big disappointments came from the housing sector with significant drops in both building permits and housing starts. The mixed picture was also reflected in a leap in the Philly figure with unexciting retail sales.
- Yellen hints rate hike likely in 2015: Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill last week. Yellen declined to directly answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. The note about “stretched valuations” in some sectors of the equity markets caught investors’ attention and could serve as a hint that the Fed is set to tighten sooner. The dollar eventually reacted positively.
- Euro inflation numbers remain weak: Try as it might, the ECB can’t seem to coax much inflation out of the Eurozone economy. Final euro-zone CPI for June matched the early print at 0.5% and shows that inflation remains at rock bottom levels. This is well below the central bank’s target of 2%. Germany, the Eurozone’s largest economy, is also suffering from weak inflation. PPI came in at a flat 0.0%, and the manufacturing inflation index has failed to post a gain in 2014. Faced with weak inflation and growth levels in the Eurozone, the ECB will be under pressure to take some action at its August policy meeting.
More: EUR/USD in downtrend as USD is on the move – Elliott Wave Analysis
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