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EUR/USD  is back to the lower range, falling down  from the short lived bounce above 1.27. This comes despite as German  data is decidedly mixed.  The focus is  on inflation numbers today, which precede the ECB decision on Thursday. Later on, we are due to get a reminder of why the dollar is strong.

Update:  Euro-zone inflation at 0.3%, core falls to 0.7% – EUR/USD confirms break down – reaches 1.2601

Here’s a quick update on technicals, fundamentals and sentiment moving the pair.

  • Asian session: The pair could not hold above 1.27 and fell back down.
  • Current range:  1.2660 to 1.27.

Further levels in both directions:

EURUSD September 30 2014 euro dollar end of quarter technical analysis fundamenal outlook and sentiment

  • Below: 1.2660, 1.2620, 1.2587 and 1.25.
  • Above: 1,27, 1.2750, 1.2820 and 1.2870.
  • 1.2660 is strong support – where the now broken uptrend began.
  • 1.2750 is key resistance, as it was a double bottom in 2013.

EUR/USD Fundamentals

  • 6:00  German Retail Sales. Exp. +0.6%. Actual +2.5%.
  • 6:45 French consumer spending for two months: July -0.7%, June +0.7%.
  • 7:55  German Unemployment Change. Exp. -2K. Actual: +12K – quite a disappointment
  • 9:00 Euro-zone CPI. Exp. +0.3%, core exp. +0.9%.
  • 9:00 Euro-zone unemployment rate. Exp. 11.5%.
  • 9:00 Italian CPI. Exp. -0.3%.
  • 13:00 US  S&P/CS Composite-20 HPI. Exp. 7.5% y/y.
  • 13;45 US Chicago PMI. Exp. 61.6 points.
  • 14:00 US CB Consumer Confidence. Exp. 92.2 points.

* All times are GMT.

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

EUR/USD Sentiment

  • Is the lower value of the euro already pushing inflation higher?: This is the key question for the ECB. The euro has weakened significantly since peaking just under 1.40 back in May. At current levels, we might already see the euro-zone CPI rise from rock bottom levels, but perhaps it may take longer. German CPI for September was marginally better than expected.
  • Fed favorite inflation figure remains low: The Core PCE Price Index is the Federal Reserve’s preferred measure of  inflation. Despite a rise of 0.1% m/m, the y/y value remains at a weak 1.5%, below the Fed’s target. This provides fuel for the Fed doves.
  • General dollar strength: The US dollar takes only short pauses between its gains, that were most recently inspired by the  preparation of Yellen to  exit monetary stimulus. A fresh round of dollar buying hit weak currencies such as the kiwi as well as stronger ones such as the pound.  While each currency has a story of its own, the general trend is certainly dollar bullish and the euro is not one of the stronger currencies.
  • Draghi ready to act: This is not news, but the comments about being ready to do more, especially after the poor TLTRO, just provided another reason for selling  EUR/USD. It is unlikely that the ECB will  announce big new measures this  week, but more dovish words and more details about the ABS program are now expected, especially if inflation is low.

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