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EUR/USD Advances Ahead Of ECB Meeting -

Jun, 02nd 11:55
MW-DC996_euro_p_ZG_20150109144001

Demand for the Euro (EUR) remained stronger on Thursday, despite the latest Eurozone Manufacturing PMIs indicating that growth within the currency union remains stagnant. As the OECD took a slightly less pessimistic outlook on the Eurozone economy, investors seem to favor the single currency over its rivals.

The European Central Bank will conclude its policy meeting later today at 7:30 am EDT, though no change is expected to its monetary policy and stimulus package ahead of the result from the UK’s referendum on EU membership. Should this be the case, the Euro will continue to strengthen. However, any mention of future policy easing from ECB officials could weigh on demand.

In contrast, the U.S. dollar slipped on fresh doubts about a Federal Reserve interest rate rise in June. On Thursday, the US dollar index fell 0.2% to 94.25 so far.

In US data released Wednesday, ISM manufacturing PMI and prices for May were at 51.3 and 63.5 respectively, both beating expectations of 50.5 and 58.0. Construction spending month-over-month in April, however, disappointed at -1.8 percent, a major miss from the 0.5 percent estimate. Although the numbers have improved, they may not be good enough.

Key economic data due later on Thursday includes US ADP non-farm employment, which will offer a preview to the government-released jobs report on Friday. If US Unemployment Rate and Change in Non-Farm Payrolls produce disappointing results, the Euro will likely extend gains amid speculation of longer-term delays to a Fed rate hike.

The Organization of Petroleum Exporting Countries (OPEC) will meet in Vienna later today as well but there are doubts in the market that it will be able to reach an agreement to cap crude oil production. Thursday will also see the release of US Crude Oil Inventories, which could result in volatility in the oil market. The Eurodollar exchange rate has been highly correlated with the crude oil price since 2001. A fall in the price of oil goes hand in hand with a fall in the relative strength of the Euro.

eu d1

Fig. EURUSD D1 Technical Chart

Currently, EUR/USD is trading higher at 1.12149, finally advancing through the 1.12000 barrier, although the pace has consolidated after the overnight rally. The bearish trend in EUR that started slightly more than 2 weeks ago has ended. DI+ (red) is above DI- (green), speculating for an uptrend with ADX of 26.32. Stochastic is bouncing back out of oversold zone. The %K line is above %D line indicating that the bullish trend is in action and the pair may continue going up.

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