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With the US markets closed on Monday, and no releases out of Europe, the EUR/USD  also enjoyed a long weekend, showing no movement. The pair has edged lower on Tuesday, and is putting strong pressure on the 1.29 line. German Import Prices posted a sharp drop of 1.4%, its worst reading since July 2012. In the US, today’s highlight is US CB Consumer Confidence.

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 some movement, dropping below the 1.29 line and touching a low of 1.2884.  We are seeing a similar  pattern in the  European session, as EUR/USD briefly dipped below the 1.29 before moving back up above this line.

Current range: 1.2890 – 1.2960.

Further levels in both directions:   EUR USD Daily Forecast May28

 

  • Below: 1.2890, 1.2840, 1.2800, 1.2750, 1.27, 1.2624 and 1.2587.
  • Above: 1.2960, 1.30, 1.3050, 1.31, 1.3160 and 1.32, 1.3255, and 1.3290.
  • 1.2890  is facing strong downward pressure from the pair. The next support level is 1.2840.
  • On the upside, 1.2960 has strengthened as the pair trades at lower levels.

Euro  showing some  movement, testing 1.29 line  – click on the graph to enlarge.

EUR/USD Fundamentals

  • 6:00 German Import Prices. Exp. -0.2%. Actual -1.4%.
  • 13:00 US S&P/CS Composite-20 HPI.
  • 14:00 US CB Consumer Confidence. Exp. 70.7 points.  See how to trade this event with USD/JPY.
  • 14:00 US Richmond Manufacturing Index. Exp. 2 points.

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

EUR/USD Sentiment

  • German numbers rebound: After some  lukewarm PMI  data  out of Germany earlier in the week, there was positive news out of  the Eurozone’s number one economy on Friday.  GfK German Consumer Climate posted  its  highest level in almost six years, and IFO Business Climate  surprised with a better than expected figure. German GDP bounced back from a decline in Q4, posting a modest 0.1% gain. However, German Import Prices did not keep pace, posting a decline of 1.4%. We’ll  get a better picture of the  direction of the German  economy this week, with the releases of German CPI, Unemployment Change and Retail Sales. If these indicators meet market expectations, the shaky euro could get a much-needed  boost.
  • More positive news from the US: The markets are used to ups and downs in US numbers, and we continue to see alternating weeks in economic data:  this past week was  mostly positive, with  better than expected new home sales, a record low in continuing claims and a nice rise in durable goods orders  on Friday.  The mixed bag of releases has made it difficult to assess the extent of the US recovery, and the US Federal Reserve has so far maintained a steady course with the current round of QE.
  • Bernanke sends euro on wild ride:  The markets were treated to a wild ride from the Euro, courtesy of US Federal Reserve Chair Bernard Bernanke. He 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, Hints from Fed officials about whether QE will be maintained will continue to rock the markets.
  • Fed split over QE:  Overshadowed by Ben 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.
  • Negative Interest Rates for ECB? Recent comments from the ECB about negative interest rates have affected the euro,  and  ECB  Mario Draghi and other policymakers  are open to the idea. On Monday, ECB Executive Board member Joerg Asmussen said that the ECB  will continue it expansive monetary policy in order to boost the Eurozone economy,  but  urged caution on the  question of  whether  to continue reducing rates. The ECB’s deposit rate currently stands at zero. Asmussen  said that the  ECB can’t  simply fix  uncompetitive economies with monetary policy, such as the adopting negative interest rates. We can expect a strong debate within the ECB before any moves are taken in this direction.