The euro continues to trade at high levels on Thursday, as EUR/USD trades close to the 1.39 line, its highest level since early April. European markets are closed for the May 1 holiday, but that hasn’t stopped the euro, which continues to post gains. There are no European events on Thursday due to the holiday. In the US, it’s a busy day with two major releases – ISM Manufacturing PMI and Unemployment Claims. As well, Federal Reserve Chair Janet Yellen will speak at a banking conference in Washington. On Wednesday, the Fed implemented another taper of QE and stated that it expected interest rates to remain at low levels.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- EUR/USD was steady for most of the Asian session, before edging up to the 1.3880 line. The pair is unchanged in European trading.
Current range: 1.3865 to 1.3905.
- Below: 1.3865, 1.3830, 1.3785, 1.3740, 1.37, 1.3650 and 1.3560, 1.3515 and 1.3450
- Above: 1.3905, 1.3964, 1.40, 1.4055 and 1.4105
- On the upside, 1.3905 is the next line of resistance 1.3964 follows.
- 1.3865 is a weak support line. 1.3830 is next.
- 11:30 US Challenger Job Cuts.
- 12:30 US Fed Chair Janet Yellen Speaks.
- 12:30 US Unemployment Claims. Exp. 317K.
- 12:30 US Core PCE Price Index. Exp. 0.1%.
- 12:30 US Personal Spending. Exp. 0.7%.
- 12:30 US Personal Income. Exp. 0.4%.
- 13:45 US Final Manufacturing PMI. Exp. 55.8 points.
- 14:00 US ISM Manufacturing PMI. Exp. 54.3 points. See how to trade this event with USD/JPY.
- 14:00 US Construction Spending. Exp. 0.5%.
- 14:00 US ISM Manufacturing Prices. Exp. 59.4 points.
- 14:30 US Natural Gas Storage. Exp. 75B.
- All Day – US Total Vehicle Sales. Exp.16.2M.
*All times are GMT
- QE tapers continues: As widely expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.
- US GDP tumbles: Advance GDP has posted strong gains recently, but the key indicator’s upward swing came to a crashing halt, with a Q1 gain of just 0.1%, compared to a 3.2% reading in Q4. This was well off the estimate of 1.2%. Is the US economy stalling? The weak reading can be partially blamed on the harsh winter which took its toll on the economy, but this will be of little consolation to the markets, and the dollar continues to struggle at the high-flying euro.
- German numbers point in all directions: German numbers were a mix on Wednesday. Retail Sales, the primary gauge of consumer spending, weakened in March, coming in at -0.7%, marking a three-month low. This was slightly lower than the estimate of -0.6%. On the bright side, Unemployment Change dropped by 25 thousand, much better than the estimate of -12 thousand. Meanwhile, Eurozone CPI Flash Estimate posted a gain of 0.7%, just short of the estimate of 0.8%. The euro has shown some movement in the European session, and has rebounded after dipping below the 1.38 line earlier.
- Will ECB take action against high-flying euro?: For the second time, ECB head Mario Draghi tied between the value of the euro and future monetary policy. This mention comes as the euro remains firm not only against the dollar but also against the Chinese yuan which is depreciating. EUR/CNY is at the highest since 2011. The ECB has drawn its “line in the sand” at the 1.40 level, and we can expect more rhetoric from Draghi if the euro gains further ground. The ECB is also watching the inflation situation carefully, with the danger of deflation a growing concern. Eurozone CPI Flash Estimate posted a gain of 0.7%, just shy of the estimate of 0.8%.