EUR/USD

It has been a busy week with several economic data releases. However it’s not over yet! Today market expects U.S. Q1 GDP. Expectation is to be around 2.5%. 4Q’11 was at 3%. Over the past few days housing data and jobless claims were disappointing. A the back of news flow from Euro Zone (disappointing Italian bill auction yesterday and bond auction expected today…) and U.S., EUR/USD has consolidated in a tight range between 1.33 and 1.30. If we look at the larger picture, EUR/USD is in a downtrend with the crossrate trading below the 200 day moving average (1.34) and continues to remain in the downward trend channel. However, in the short-term it is more of a sideways consolidation that will see a strong breakout in one direction. 1.33-1.34 area is strong resistance and if it is broken on the upside it will signal intermediate term strength for EURO towards 1.38 levels. 1.30-1.305 area is strong support. If the cross rate breaks down the support area we will expect dollar strength in the intermediate term towards 1.25 levels. Until we see that major breakout we continue to watch EUR/USD with a neutral short/intermediate term outlook.