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The euro is showing signs of recovery after sustaining sharp losses at the hands of the dollar last week. EUR/USD  is trading in the high-1.28 range in Tuesday’s European session. The week did not start out well in the Eurozone, as  German releases looked weak. Both German Trade Balance and Industrial Production missed their estimates. There are no major releases from the Eurozone or the US on Tuesday, but the markets are eagerly waiting for the release of the minutes from the last Federal Reserve policy meeting, which will be released on Wednesday.

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

EUR/USD Technical

  • Asian session: Euro/dollar showed movement, climbing close to the 1.29 line as it reached a high of 1.2894. The pair consolidated at 1.2882. In the European session,  Euro/dollar is unchanged.

Current range: 1.2840 – 1.2890.

Further levels in both directions:  EUR USD Daily Forecast July 9th

 

  • Below: 1.2840, 1.28, 1.2750, 1.27, 1.2660 and 1.26.
  • Above: 1.2890, 1.2940, 1.30, 1.3050, 1.3100, 1.3160, 1.32, 1.3255, 1.3350 and  1.34
  • 1.2840 is providing weak support.  The round number of 1.2800 is next.
  • On the upside, there is strong pressure on 1.2890. This is followed by 1.2940.

Euro  struggling as fallout from strong US NFPs continues – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:45  French Government Budget  Balance. Actual -72.6B.
  • All Day – ECOFIN Meetings.
  • 11:30 US NFIB Small Business Index. Exp. 96.2 points.
  • 14:00 US JOLTS Job  Openings. Exp. 3.81M.

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

EUR/USD Sentiment

  • Which way is Germany headed?:  We continue to see mixed numbers out of Germany, making it difficult to predict which way the Eurozone’s largest economy is headed. Monday’s releases  were not encouraging. German Trade Balance fell badly, from 17.7 billion euros to 14.1 billion. Industrial Production fared no better, hitting a seven-month low, as it posted a decline of -1.0%. Both indicators fell short of their estimates. This contrasts with numbers released in late June. German Ifo Business Climate was steady, Consumer Climate hit a six-year high, and Unemployment Change pointed to a sharp drop. The Eurozone continues to struggle with weak growth and political crises, and will need a strong German economy to lead the way to economic recovery for the continent.
  • Portugal crisis eases:  The political crisis which gripped Portugal last week is over, according to Prime Minister Pedro Passos Coelho. The country has been struggling with austerity measures as part of its bailout program, and the government  was rocked by the resignations of the finance and foreign ministers last week. Coelho said a deal had been reached with a junior coalition party, which would ensure that the government continues to run the country. There was concern that the crisis could derail the 78 billion bailout agreement. The political deal is subject to the approval of Portugal’s president, Anibal Cavaco Silva.  He is scheduled to continue meeting with political parties on Tuesday.
  • Spanish PM accused of corruption: Just when it seemed that the Portuguese government had dodged a severe political crisis, its eastern neighbor has its own political hot potato to worry about. The ruling party in Spain appears to have been involved in a corruption scandal, and now Prime Minister Mariano Rajoy has been implicated as well. There is a report in the Spanish media that Rajoy received  illegal payments  while serving as a minister in the Aznar government back in the late ’90s.  If the scandal deepens, this could  topple the  government, and lead to turmoil in the country. Clearly, another political crisis in Europe will have a negative impact on the shaky euro.
  • Eurogroup releases  some bailout aid to Greece: Eurozone financial ministers met on Monday, and decided to release more aid to Greece, but only part of the scheduled tranche of 8.1 billion euros. Greece will receive 3 billion euros in July and additional funds in August and October. The Eurogroup  decision to give Greece only a portion of the funds points to dissatisfaction with the lack of progress by Athens in implementing the bailout conditions, including  improved tax collection  and  cuts to the bloated public service. Greece will have to show more progress in economic restructuring before the troika releases more bailout funds.
  • Dollar jumps after strong NFP release: The US ended the week in style, with a solid Non-Farm Payrolls release on Friday. The key indicator cruised to a four-month high, with 200 thousand new jobs. This easily surpassed the estimate of 163 thousand. Unemployment Claims, released   earlier in the week, looked good, coming in just below the estimate. There are several reasons why this report is so positive. The US dollar is enjoying broad strength  for two reasons. First, the strong employment data points to an improving economy. Second, there is now a stronger likelihood that the Federal Reserve  will taper QE, which would be a dollar-positive event.