EUR/USD – Euro Firm As German Consumer Climate Impresses

EUR/USD continues to trade at high levels on Tuesday, as the pair trades in the mid-1.38 range in the European session. In economic news, German Consumer Climate posted another sharp reading and matched the forecast. Later in the day, we’ll get a look at German Preliminary CPI. In the US, today’s highlight is CB Consumer Confidence. The markets are expecting the indicator to improve in the March release.

US housing numbers were on the weak side last week, but it was a different story on Monday, as Pending Home Sales soared in March. The key indicator jumped 3.4%, easily beating the estimate of 1.0%. This marked its biggest monthly gain since last May. The indicator has posted mostly declines in recent readings, so the strong gain was welcome news. Meanwhile, US consumers appear to be content, as the UoM Consumer Sentiment jumped to 84.1 points in March, beating the estimate of 83.2. It marked the indicator’s highest level since June. If the optimism continues and translates into increased consumer spending, this should bode well for the US economy.

The ECB has been under increasing pressure to take action as inflation remains in the doldrums in the Eurozone and the euro continues to trade at high levels. On Thursday, Draghi took note of the high euro exchange rate, calling it an “increasingly important factor” in monetary policy. He hinted that the central bank’s monetary policy stance could change if the euro continues to gain in value. When the euro appeared headed to the 1.40 level several weeks ago, Draghi was able to “talk down” the currency. Will this play work a second time? Draghi also stated that an asset purchase program could be introduced if the inflation outlook worsens.

With the Eurozone continuing to struggle, Germany will have to take the lead as the region’s number one economy. There was good news on Tuesday, as German Consumer Confidence matched the forecast with a strong reading of 8.5 points. The indicator has recorded this figure for three straight months, pointing to strong optimism from German consumers.

EUR/USD for Tuesday, April 29, 2014

EUR/USD April 29 at 11:15 GMT

EUR/USD 1.3860 H: 1.3879 L: 1.3851

EUR/USD Technical

• EUR/USD has edged higher in Tuesday trade.
• 1.3786 continues to provide strong support.
• 1.3893 is the next resistance line. It is a weak line and could face strong pressure if the euro moves higher. This is followed by the key level of 1.40, which has not been breached since October 2011.
• Current range: 1.3786 to 1.3893

Further levels in both directions:

• Below: 1.3786, 1.3649, 1.3585, 1.3410 and 1.3335
• Above: 1.3893, 1.4000, 1.4149 and 1.4307

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in Tuesday trading. This is consistent with the movement we are seeing from the pair, as the euro has not showed any significant movement. The ratio is made up of short positions, indicative of the dollar moving to higher levels.

EUR/USD continues to trade in the mid-1.38 range. The pair has edged lower in the European session.

EUR/USD Fundamentals

• 6:00 GfK German Consumer Climate. Estimate 8.5 points. Actual 8.5 points.
• All Day – German Preliminary CPI.  Estimate -0.1%.
• 7:00 Spanish Employment Rate. Estimate 25.6%. Actual 25.9%.
• 8:00 Eurozone M3 Money Supply. Estimate 1.4%. Actual 1.1%.
• 8:00 Eurozone Private Loans. Estimate -2.0%. Actual -2.2%.
• 8:00 Eurozone Italian Retail Sales. Estimate 0.4%. Actual -0.2%.
• Tentative – Italian 10-year Bond Auction.
• 13:00 US S&P/CS Composite-20 HPI. Estimate 12.9%.
• 14:00 US CB Consumer Confidence. Estimate 82.9 points.

*Key releases are highlighted in bold

*All release times are GMT

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