EUR/USD Aug. 15 – Capped on the upside yet again amid thin liquidity

EUR/USD: managed to make an upwards move but was capped by 1.33 once again. The positive GDP numbers are still not digested by the markets. Most of Europe is closed today due to a bank holiday, making liquidity conditions thinner. The pair now relies on important US figures that could guide the Fed: employment and inflation as well as quite a few other numbers. Will the pair choose a direction?

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

EUR/USD Technical

• Asian session: Euro/dollar jumped higher during the Asian session, but couldn’t break 1.33, for the umpteenth time.

Current range: 1.3255 to 1.3300.

Further levels in both directions: 

• Below: 1.3255, 1.3175, 1.31, 1.3050 and 1.30.
• Above: 1.33, 1.3350, 1.3415, 1.3480 and 1.3520.
• 1.3255 is providing weak support. We’ve already seen it dip to lower ground.
• 1.3415, the June peak is now strong resistance just above the round 1.34.

EUR/USD Fundamentals

• 12:15 US FOMC member James Bullard speaks. He is a dove.
• 12:30 US jobless claims. Exp. 334K.
• 12:30 US CPI, exp. +0.2%, Core CPI exp. +0.2%.
• 12:30 US Empire State Manufacturing Index. Exp. +10.2 points.
• 13:00 US TIC Long-Term Purchases. Exp. +31.3 billion.
• 13:15 US industrial output. Exp. +0.5%.
• 13:15 US Capacity Utilization Rate. Exp. 77.9%.
• 14:00 US Philly Fed Manufacturing Index. Exp. +15.6 points.
• 14:00 US NAHB Housing Market Index. Exp. 57 points.

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

EUR/USD Sentiment

• Critical Septaper data: FOMC member Denis Lockhart said something along the lines of “employment really needs to be terrible to move the tapering decision”. This is dollar positive. However, as we’ve seen previously, Bullard is worried about disinflation. Bullard followed the official line of “it depends on the data”. He’ll speak again but the data is due to overshadow his words. A weakening core CPI could deter the Fed from tapering. Another low figure in jobless claims will certainly raise the tapering expectations. However, tapering remains a close call for both the Fed and the markets.
• Strong core weak periphery: The euro isn’t riding on the good data, and for a reason. Germany and France lead the euro-zone together once again. The news from France is especially encouraging. However, Italy and Spain are still in recession. Can this imbalance continue for a long time? Here are 4 reasons why the euro-zone is out of recession, but not out of the woods.
• Crisis in Egypt not having an impact yet: The bloodshed in Cairo and in other Egyptian cities has a minor effect on the price of oil and does not impact the dollar or the euro just yet. This could change if the situation further deteriorates.
• Lower volume: We are already deep into August, and trading volume has fallen. Assumption Day in Europe also takes its toll today.