EUR/USD – Euro Drops Below 1.36 Despite Solid Eurozone Numbers

Euro/USD has lost some ground in as we start the new trading week. The euro dropped below the 1.36 line in Monday’s European session, despite some solid data out of the Eurozone on Friday. In the US, employment numbers continued to disappointment, as Non-Farm Payrolls did not meet the estimate and the unemployment rate moved higher. However, consumer sentiment and manufacturing data looked sharp. The new trading week is off to a slow start, with only four releases scheduled for Monday. In Spain, Unemployment Change was up sharply, but managed to beat the estimate. Today’s sole US release is Factory Orders.

The euro continues to trade at high levels, as the Eurozone wrapped up the trading week on a solid note. The highlight was the Eurozone Unemployment Rate which dipped to 11.7%, beating the forecast of 11.9%. Spanish, Italian and Eurozone Manufacturing PMIs were all slightly above the estimate, although all three remain below the 50 point threshold, indicating contraction in the manufacturing sector. The euro continues to trade above the 1.36 line, as there is positive market sentiment that the Eurozone may have turned the corner and the worst is now behind us. However, many economic indicators point to ongoing weakness in the economy, and an unemployment rate close to 12% will not win any accolades. Still, there is a sense of optimism, and that sentiment can certainly be a market-mover.

The US continues to keep the markets guessing about the extent of the US recovery. Last week produced more mixed data. GDP was a major disappointment, as the economy contracted for the first time since 2009. Employment numbers lost their recent shine, as NFP and Unemployment Claims failed to meet expectations, and the unemployment rate inched up to 7.9%. On the bright side, last week’s consumer sentiment and manufacturing PMI data was very strong. UoM Consumer Sentiment climbed to 73.8 points, well above the estimate of 71.4 points. ISM Manufacturing PMI hit an eight-month high of 53.1 points, easily exceeding the forecast of 50.8 points. With only a handful of key US releases this week, each one will find itself under the market microscope as the markets try to get a handle on where the US economy is headed.

 The US Federal Reserve was in the spotlight last week, as the powerful US central bank met for a two-day policy meeting. There were no surprise developments, as the Fed stated it would continue its open-ended QE3 program until the outlook for the labor market “improves substantially”. The Fed noted that economic growth had stalled, but was confident that the pause was a temporary one. This laid to rest speculation that the current round of QE, under which the Fed is purchasing $85 billion a month in securities, might be terminated anytime soon. The Fed maintained its ultra-low benchmark interest rate, saying there would be no change until unemployment drops below 6.5%. With US unemployment hovering close to 8%, we’re unlikely to see this target met anytime soon.

 

EUR/USD for Monday, February 4, 2013

Forex Rate Graph Monday, February 4, 2013

EUR/USD February 4 at 10:20 GMT

1.3590 H: 1.3659 L: 1.3573

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.34 1.3480 1.3550 1.3627 1.3690 1.3745

 

EUR/USD has lost some ground, dipping below the 1.36 level in Monday trading. 1.3627 is providing weak resistance on the upside, and this line could face further activity if the pair undergoes a correction. 1.3690 is providing stronger resistance. On the downside, 1.3550 is a weak line of support. This is followed by 1.3480.

Current range: 1.3550 to 1.3627.

Further levels in both directions:

  • Below: 1.3550, 1.3480, 1.34, 1.3350, 1.3280, 1.3240 and 1.3170.
  • Above: 1.3627, 1.3690, 1.3745, 1.3796, 1.3858 and 1.3936 and 1.40.

 

OANDA’s Open Position Ratios

The EUR/USD ratio continues to show very little movement. At the same time, trader sentiment remains strongly biased towards short postions, indicating a prevailing view that the euro is overpriced. We are currently seen this sentiment reflected in the current movement of the pair, as the euro has lost ground as we start the new trading week. If this downward move continues, look for the ratio to show some movement as well.

After a spectacular January, we are seeing the euro look mortal again, as it has lost some ground to the US dollar. Will the pair’s push southward continue? It is a quiet day as far as economic indicators, so we could see the pair level off in the mid-1.35 range.

 

 EUR/USD Fundamentals

  • 8:00 Spanish Unemployment Change. Estimate 150.0K. Actual 132.1K.
  • 9:30 Eurozone Sentix Investor Confidence. Estimate -2.2 points. Actual -3.9 points.
  • 10:00 Eurozone PPI. Estimate -0.2%.
  • 15:00 US Factory Orders. Estimate 2.3%.

 

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.