The European Commission revised its growth forecast for the eurozone last Tuesday to 1.5% from 1.3% in 2015, while keeping it unchanged at 1.9% for next year. The Commission cited cheaper oil, a weaker euro, stable global growth and supportive fiscal and monetary policies as the reasons for the revision.

Soft economic data, such as the eurozone PMI, disappointed for April. An initial reading of the eurozone manufacturing PMI dipped to 51.9 for April from 52.2 in March, missing the 52.6 that economists polled by Bloomberg were expecting. The composite index, which combines the services and industrial sectors, came in at 53.5, compared to 54 for March, missing the forecast of 54.4. Any reading above 50 indicates expansion.

According to an April 30 Eurostat release, the unemployment rate in the eurozone was at 11.3% in March 2015, in line with market expectations. It has held steady since January, at around 11.5%. Greece’s and Spain’s unemployment rates still remain high, about 25.7% and 23%, respectively. Some critics are raising questions whether the ECB stimulus will actually help. 

The EUR/USD exchange rate bounced off 1.0456 dollars per euro on March 16, after European Central Bank (ECB) president Mario Draghi said at a news conference, after the ECB's policy meeting, that the ECB expects to fully implement its 1 trillion euro government bond buying program due to run until September 2016.

The EUR/USD has been on the decline since it plunged on February 26, after the ECB unveiled the details of their bond buying plan that would increase the total monthly fund injection to 60 billion euros. The market was speculating that the plan might not be effective, as the ECB would scale back its buying program at some point if the eurozone economy showed signs of recovery.

The Greece debt crisis dragged down the EUR/USD to an April low of 1.0519 dollars per euro before the ECB announced that it raised the limit on emergency liquidity assistance (ELA) by 800 million euros to 74 billion euros, in order to avoid Greek bank insolvency. 

As of May 8, there are 257,731 short positions of euro FX (CME:6E), traded on the Chicago Mercantile Exchange (CME), by asset manager/institutional and leveraged funds. This is compared to about 88,135 long positions, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) each Friday. Short positions have declined about 12,807 contracts from last week where euro FX contracts are traded in units of 125,000 euros.

From our technical viewpoint, the EUR/USD is moving in a shallow symmetrical triangle between the 1.14 dollars per euro and 1.05 dollars per euro levels. As the Fed rate hike looms, the EUR/USD could pull back to technical support levels at the 1.087 and 1.067 dollars per euro levels if no significant hard economic data comes out from the eurozone. In the event of a breakout, the next head resistance is 1.18 dollars per euro.