EUR/USD started the new week with a small gap lower, but quickly returned to the 1.3175 level, which serves as a magnet. It then continued higher, but quite carefully. After markets were already gearing up for QE tapering, the disappointing Non-Farm Payrolls in the US created a lot of confusion. With a light calendar today, markets will be digesting the NFP and also Draghi’s cautiousness.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- In the Asian session, EUR/USD opened with a Sunday gap at 1.3155 but quickly closed the gap.
Current range: 1.3175 1.3240.
- Below: 11.3175, .31, 1.3050 and 1.30.
- Above: 1.3175, 1.3240, 1.33, 1.3350, 1.3415, 1.3450, 1.3520, 1.3590 and 1.37.
- On the upside, 1.3240 proved itself as support.
- 1.3100 is holding on so far, but the pair is getting close.
- 8:30 Euro-zone Sentix Investor Confidence. Exp. -4 points. Actual 6.5.
- US Consumer Credit. Exp. 12.7 billion.
* All times are GMT.
For more events and lines, see the Euro to dollar forecast.
- Disappointing NFP: There was a big buildup to the Non-Farm Payrolls culminating with the big surprise in the ISM Non-Manufacturing PMI: the headline reached the highest since 2005, and the employment component increased to 57.7, reflecting strong growth. However, the US gained only 169K jobs and the participation rate fell to the lowest since 1978. Downward revisions also weighed. It will be harder for Bernanke and co. to taper, but it seems that a $15 reduction in monthly bond buys is still likely. The not-so-strong EUR/USD reaction to the NFP exposes the euro’s weakness.
- Only a green recovery in Europe: ECB president Mario Draghi said he is “not enthusiastic” about the return to growth and warned about money markets. In addition, the ECB lowered its growth forecast for 2014. A rate cut is still on the cards, and forward guidance is here to stay. On this background, the euro remains weak, and not only against the dollar.
- Syrian tensions are on the rise: A US military strike seems closer, as the military makes preparations and despite falling chances of an approval from Congress. The story is expected to unfold this week. Only an extreme escalation in Syria can prevent QE tapering.
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