EUR/USD May 1 – Charges Higher Ahead of Fed Meeting

EUR/USD continues to move upwards on Wednesday. The pair was testing the 1.32 line in the European session, as the US dollar continues to weaken. In the US, the markets will be hoping for good news from ADP Non-Farm Employment Change and the ISM Manufacturing PMI. This will be followed by the FOMC Statement at the Federal Reserve Policy Meeting. In Europe, the markets are closed for the May 1 holiday.

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

EUR/USD Technical

• Asian session: Euro/dollar was steady, touching a high of 1.3186 and consolidated at 1.3167. The pair has moved higher in the European session, and is testing the 1.32 line.
• Current range: 1.3050 to 1.3100.

Further levels in both directions: 

• Below:1.3170, 1.3140, 1.31, 1.3050, 1.3000, 1.2960, 1.2880, 1.2805, 1.2750 and 1.27.
• Above: 1.3255, 1.3290, 1.3350 and 1.34.
• 1.3170 is providing weak support. 1.3140 is stronger. 
• 1.3255 is a strong resistance line.

Euro moves higher ahead Fed meeting – click on the graph to enlarge.

EUR/USD Fundamentals

• 12:15 ADP Non-Farm Employment Change. Exp. 154K
• 13:00 US Final Manufacturing PMI. Exp. 52.1 points
• 14:00 US ISM Manufacturing PMI. Exp. 51.0 points.
• 14:00 US Construction Spending. Exp. 0.7%
• 14:00 US ISM Manufacturing Prices. Exp. 52.6 points.
• 14:30 US Crude Oil Inventories. Exp. 1.2M.
• All Day: US Total Vehicle Sales. Exp. 15.2 M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Exp. <0.25%.

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

EUR/USD Sentiment

• Italy forms government: After months of paralysis, Italy has finally formed a government. The deadlock, which had paralyzed the Eurozone’s third largest economy and had kept the markets on edge, was finally broken as Enrico Letta was nominated as prime minister last week. Letta’s Democratic Party does not have a parliamentary majority, so the coalition he has cobbled together may not last for long. Letta, is considered a moderate and is liked within the Eurozone. The new government will be faced with an economy mired in recession and a sour electorate that is fed up with austerity measures. The markets were pleased by the news, and Italian 10-year bonds were down, dropping below 4%. There was further positive news as the Italian Monthly Unemployment Rate beat the forecast.
• US numbers improve: US data has looked sharp, reversing weeks of disappointing key data from the world’s number one economy. On Monday, US Pending Home Sales posted a gain of 1.5%, beating the forecast of 1.1%. The next day, CB Consumer Confidence jumped to 68.1 points, blowing past the estimate of 61.4 points. The markets will be hoping for more good news on Wednesday, as the US releases key employment and manufacturing numbers.
• German Data Mixed: German data looked sluggish last week, and Tuesday’s numbers were mixed. Retail Sales declined 0.3%, below the estimate of 0.2%. Unemployment Change came in at 4 thousand new claims, worse than the estimate of two thousand. On the bright side, there Consumer Climate rose to 6.2 points, beating the estimate of 5.9 points. In order for the Eurozone to stage a recovery, Germany will have to lead the way with improved numbers.
• Will ECB press the trigger and cut rates? The Eurozone seems to be lurching from one crisis to another, as we have seen with the Cyprus bailout mess and the political impasse in Italy. Add to the mix weak economic activity from major economies in the Eurozone, and we could have a recipe for an interest rate cut by the ECB. Speculation that the ECB will take action is growing, as Euro-zone headline CPI fell from 1.7% to 1.2%, significantly below the 1.6% estimation and well off the 2% inflation target. CB does not meet until Thursday, but the growing possibility of an interest rate cut promises to be a hot topic until Thursday.

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