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EUR/USD  is starting off the new trading week quietly. The euro gained closed to one cent last week, and is trading in the mid-1.33 in Monday’s European session. Taking a look at Monday’s releases,  it’s a   quiet start to the week. Eurozone releases started off with a whimper ,as  today’s tow releases disappointed. Both Italian and Eurozone  Trade  Balances  fell well short of their estimates. In the US, today’s highlight is the Empire State Manufacturing Index. After a weak reading in May, the markets are expecting some improvement in the upcoming release.

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

EUR/USD Technical

  • Asian session: Euro/dollar  lost ground, touching a  low of  1.3318. The pair consolidated at 1.3329.  Euro/dollar  has edged higher  in the European session.

Current range: 1.3255 – 1.3350.

Further levels in both directions:       EUR USD Daily Forecast June 17

  • Below: 1.3255, 1.32, 1.3160, 1.31, 1.3050, 1.30, 1.2940, 1.2890, 1.2840, 1.28, 1.2750  and  1.27.
  • Above: 1.3350, 1.34, 1.3434, 1.3480, 1.3580  and  1.3710.
  • 1.3255  is providing support. 1.32 is stronger.
  • On the upside, the pair is testing 1.3350. The round number of 1.34 is next.

Euro  trading steadily in mid-1.33 range  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 8:00  Italian Trade Balance. Exp. 2.48B. Actual 191B.
  • 9:00  Eurozone Trade Balance. Exp. 21.2B. Actual 16.1B.
  • 12:30 US Empire State Manufacturing Index. Exp. 0.4 points.
  • 14:00 US NAHB Housing Market Index. Exp. 45 points.
  • Day 1 of G8 Meetings.
  • 15:10 German Buba President Jens Weidmann Speaks.

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

EUR/USD Sentiment

  • Eurozone, US release inflation numbers: On Friday, the markets got a look at important inflation data out of the Eurozone and the US. In Europe, inflation numbers have not been strong, pointing to weak economic activity. This was one factor in the recent ECB reduction cut, so as to encourage more spending and breathe some life into the economy. Eurozone inflation  numbers matched the forecast. Eurozone CPI came in at 1.4%, and Core CPI gained 1.2%. The good news is that both indexes showed slight improvement  from  the previous readings. In the US PPI rebounded nicely after two deflationary releases, with a respectable gain of 0.5%. This easily beat the estimate of 0.2%.
  • Euro  remains strong despite  US releases: There were three major US releases on Thursday, but surprisingly, there was very little reaction from the euro. The news out of the US was positive. Retail Sales jumped from 0.1% to 0.6%, surpassing the estimate of 0.4%. Core Retail Sales also climbed nicely, from -0.1% to 0.3%. This matched the market forecast.   There was more good news as Unemployment Claims fell to 334 thousand, crushing the estimate of 354 thousand.   As well PPI, a key inflation release, posted a gain of 0.5%. The string of strong releases was cut short on Friday, as UoM Consumer Sentiment lost ground. The key indicator dropped to 82.7 points, missing the estimate of 84.9 points.
  • Markets Eye Fed Statement: The US Federal Reserve will release a statement on Wednesday, and QE has become  perhaps the  hottest issue. Will the Fed provide any clues about tapering QE? Speculation has been growing that the Fed could make a move in the near future, and this had a very strong impact on stocks, commodities and the US dollar. Currently the Fed purchases $85 billion in assets every month. If the Fed does make a move and tighten QE, we can expect the dollar to move higher. So what will the Fed do? There are four scenarios which traders need to take into account.
  • German Court Reviews OMT: On Wednesday, the German Constitutional Court wrapped up a hearing  on the ECB’s OMT (Outright Monetary Transactions) program. OMT is a rescue program which enables the ECB to buy bonds from Eurozone members whose economies are struggling. It’s turned into a interesting case that pits  the ECB against the German Bundesbank, as the ECB board member Joerg Asmussen defended the program in front of the court, while Jens Weidmann, head of  the Bundesbank, attacked the  OMT. It should be noted that the ECB  has never purchased any  bonds under the scheme.  What can we expect from the Court? In previous cases involving the legality  of ECB rescue packages, the German court has given its approval, but has not hesitated to add conditions. So we can expect the court to give the nod to OMT, although there could some strings attached. A ruling in the matter is not expected  until September, after German  elections.