On Monday, EUR/USD trading again showed an erratic trading pattern as a clear trading theme is lacking. In the morning there was some follow-through dollar selling, extending the move at the end of last week that followed poor US consumer confidence. EUR/USD temporary broke above the range top in the 1.56 area, but the gains could not be sustained and the EUR/USD fell already back in the range at the start of the European session. What can't go up, must come down and later in the session the slightly better than expected US leading indicators (usually no market mover) were a good excuse to test the downside and EUR/USD even briefly dropped below the 1.55 mark to close the day at 1.5510 (compared to 1.5578 on Friday).
Today, the calendar contains the US PPI and the ZEW survey on economic sentiment in Germany. Usually these data are not the most important ones for currency trading, but the situation might be different today. Markets will take a close look at this week's European data (ZEW today, IFO tomorrow and PMI's on Friday) to make up their mind on the resilience of the European economy. In theory, the US PPI should be less important for markets as the CPI for the month of April is already available. However, recently less important data were quite often a trigger to hunt intra- day stop-loss levels and with no clear theme for trading available, this pattern might be repeated.
Two weeks ago, EUR/USD tested the downside of the established trading range, but this attack was rejected after the ECB press conference and EUR/USD since trades again above the previous range bottom (1.5340). So, at least for now the consolidation hypothesis can be maintained. Since then US and European eco data and events failed the give the currency markets a clear trading theme. We expect this more or less erratic trading to continue short-term. The euro has lost some of its shine recently, but US data apparently are not strong enough for the dollar to stage a more powerful rebound. We hold on to our view that there is no dominant market theme to guide trading in this pair and we expect more sideways, probably even erratic trading. In a day to day perspective, the focus now shifts to the European business confidence surveys. We tend to put the risk to the downside for the European economic data. If this comes true (and after yesterday's rejected test of the 1.56 area) such an outcome might push EUR/USD lower in the established sideways range. So, in a daily perspective we hold on to a sell-on-up-ticks approach.