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EUR/USD: news from the battlefield

Kira Iukhtenko, analyst

Euro managed to recover back above the $1.3700 handle on Monday, pushing to $1.3720. Strong German industrial production data gave some support to the single currency. Seasonally-adjusted production gained 0.4% month-on-month, with January’s production revised up to 0.7%. The numbers beat consensus expectations of 0.3% and continue a strong run of German industrial data.

Late last week euro dipped to $1.3670, pressured by the combination of the ECB meeting and the US NFP. Mario Draghi talked the euro down, saying the ECB easing remains on the table, while the US labor market data confirmed the moderate recovery in the economy. The greenback’s strength was pretty short-lived, however.

The market will be carefully watching the FOMC minutes release on Wednesday. The minutes may explain why the Fed shifted the guidance in a hawkish direction in March and give additional support for the US dollar.

From the technical viewpoint, euro remains in a bearish channel since mid-March and is now testing the support line of the mid-2013/2014 ascending trend (around $1.3700). As can be seen from the H4 chart, the upside remains limited by the bearish Ichimoku ($1.3760). Intraday there is some room for a further rebound towards the Cloud, but we expect the $1.3760/80 area to stop the buyers. Major resistance lies at $1.3800/20. Key support is now seen at $1.3650 – break below here could open the way to $1.3480 and $1.3300.

Chart. H4 EUR/USD

 

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