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This week started slowly, but that changed dramatically on Wednesday, as the  euro went on a wild ride following  remarks by Federal Reserve Chair Bernard Bernanke before a  Congressional Committee. The euro tested the 1.2998, but then fell hard, closing the day at 1.2842. Almost forgotten in the  excitement was US Existing Home Sales, which  fell below expectations. There are a host of US and Eurozone releases on Thursday. European PMIs were mixed, but French and German Manufacturing PMIs managed  to beat their estimates.  There are two US key releases later in the day – Unemployment Claims and New Home Sales.  

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

EUR/USD Technical

  • Asian session: Euro/dollar  edged lower, touching a  low of 1.2821, and consolidating at 1.2832.  The pair has  pushed higher in the European session, and was trading at 1.2882.

Current range: 1.2880 – 1.2960.

Further levels in both directions:   EUR USD Daily Forecast May23

 

  • Below: 1.2890, 1.2840, 1.2800, 1.2750, 1.27, 1.2624 and 1.2587.
  • Above: 1.2960, 1.30, 1.3030, 1.31, 1.3160 and 1.32.
  • 1.2880  is under pressure on the downside. 1.2805 is stronger.
  • 1.2960 is the next line of resistance.

Euro  pushes towards 1.29 as volatility continues  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 7:00 French Flash  Manufacturing PMI. Exp. 44.8 points. Actual 45.5 points.
  • 7:00 French  Flash Services  PMI. Exp. 44.7 points. Actual 44.3 points.
  • 7:30 German Flash  Manufacturing PMI. Exp. 48.6 points. Actual 49.0 points.
  • 7:30 German Flash  Services PMI. Exp. 50.2 points. Actual 49.8 points.
  • 8:00 Eurozone Flash  Manufacturing PMI. Exp.  47.1 points. Actual 47.8 points.
  • 8:00  Eurozone Flash  Services PMI. Exp. 47.4 points. Actual 47.5 points.
  • 8:00 Italian Retail Sales. Exp. 0.3%. Actual -0.3%.
  • 10:05 US FOMC Member James Bullard Speaks.
  • 12:30 US Unemployment Claims. Exp. 347K.
  • 13:00 US Flash Manufacturing PMI. Exp. 51.6 points.
  • 13:00 US  HPI. Exp. 0.9%.
  • 14:00 Eurozone Consumer Confidence. Exp. -22 points.
  • 14:00 US New Home Sales. Exp. 429K.
  • 14:30 US Natural Gas Storage. Exp. 90B.
  • 19:30 ECB President Mario Draghi Speaks.

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

EUR/USD Sentiment

  • Bernanke sends euro on wild ride: US Federal Reserve Chair Bernard Bernanke was in the spotlight on Wednesday, as he testified before the Joint Economic Committee of Congress. Bernanke first stated that tightening monetary policy could hurt the economic recovery. The euro reacted by rising sharply, testing the 1.30 level, but this  proved to be a short-lived  move. Bernanke later said that if US economic data improved, a decision to scale back QE could be taken in the “next few meetings”. This brought the euro back down in  a hurry, and the pair closed the day at 1.2842.
  • Fed Minutes show split over QE: Overshadowed by Bernard Bernanke’s testimony in  Congress was the release of the minutes of the most recent FOMC  policy meeting. The minutes  indicate that  the US recovery will have to deepen before the Fed will consider exiting  from  QE. The policy members were split, as some proposed tapering QE  next month, while others were in favor of increasing  QE, given the weak inflation readings we are seeing. It should be noted that the minutes relate to a meeting which took place at the  beginning of May, in contrast to  the fresh testimony of Bernanke on Wednesday.
  • Where is US economy headed?: US releases have not impressed lately, and the disappointing trend continued last week.  Inflation and manufacturing numbers fell below expectations, and housing data  did not meet the estimate.  Unemployment Claims had looked impressive in  recent readings,  but was well above expectations. There was  better news from Building Permits, and the UoM Consumer Sentiment shot up  to wrap up the week.  This week’s first major release, US Existing Home Sales, missed the estimate.  The  markets will be hoping for a turnaround as the US releases more key events later this week.
  • What’s wrong with Germany?: Germany, the largest economy in the Eurozone and the “locomotive of Europe”, continues to sputter. Last week, GDP and inflation numbers were not impressive, and Thursday’s PMIs were mixed, as Manufacturing PMI beat the estimate, while Services PMI did not meet expectations. Both releases were under the 50-point level, indicating contraction. Germany will have to show better numbers if the Eurozone is to get back on its feet, as the  weak numbers out of Germany and the Eurozone continue to weigh on the shaky euro.