EUR/USD – Steady after Sharp Losses

Highlights:

  • Euro Struggling After Weak Growth Rates in Eurozone
  • US Employment Numbers Sparkle
  • G-20 to Discuss Exchange Rates

EUR/USD remains under pressure, after the pair dropped sharply on Thursday. The euro shed almost a cent after very disappointing GDP data from the Eurozone’s biggest economies. There was better news out of the US, as Unemployment Claims fell to a five-year low. In Friday’s releases, Eurozone Trade Balance looked sharp. However, Italian Trade Balance showed a lower surplus, and did not meet the estimate. The major releases out of the US include Consumer Sentiment, as well as the Empire State Manufacturing Index. Both of these indicators have looked weak in recent readings, and the markets will be looking for some improvement in today’s releases. In Moscow, the G-20 begins a two-day meeting, and one of the topics on the agenda will be currency exchange rates.

Taking a look at economic data, the markets cheered as US Unemployment Claims dropped to 341 thousand, its lowest level in five years. The estimate stood at 361 thousand. This key indicator has been well below the 400K rate, which should translate into job growth. However, the unemployment rate remains stubbornly high, close to 8%. The reason for this is as the economy improves, more people who were out of the work force try again to find employment, which keeps the unemployment rate at high levels. In Europe, Eurozone Trade Balance climbed to EUR 12.0 billion, well above the estimate of EUR 10.7B. Italian Trade Balance disappointed, and posted a smaller surplus than in the previous release. The reading of EUR 2.16 missed the forecast, which stood at EUR 2.22B.

In Moscow, world financial leaders will huddle for two days, as the G-20 Summit gets underway on Friday. The leaders are expected to discuss currency rates, which have shown strong fluctuations, notably the Japanese yen. The Japanese government has been criticized for its monetary policy, which has seen the yen’s value plummet over the past few months. In response, Japan says that it is trying to eliminate deflation, and has not directly targeted the yen. Meanwhile, the G-7 issued a statement earlier in the week, affirming its commitment to market- determined exchange rates. Although the G-20 will discuss the matter, given the need to reach a joint communiqué at these meetings, any statement on currencies will have to be agreeable to all of the countries attending the summit.

EUR/USD for Friday, February 15, 2013

Forex Rate Graph Friday, February 15, 2013

EUR/USD February 15 at 10:10 GMT

1.3338 H: 1.3393 L: 1.3312

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3170 1.3240 1.3280 1.3350 1.34 1.3480

 

EUR/USD has steadied following Thursday’s sharp losses. The proximate resistance and support lines (S1 and R1 above) remain in place. There the faces resistance at 1.3350. This is a weak line, and could see further activity. The round number of 1.34, which has seen a lot of action this week, is the next line of resistance. On the downside, there is support at 1.3280. The next support level is at 1.3240.

Current range: 1.3280 to 1.3350.

Further levels in both directions:

  • Below: 1.3280, 1.3240, 1.3170, 1.3130, 1.3080, 1.3030, 1.30, 1.2960, 1.2835 and 1.2805.
  • Above: 1.3350, 1.34, 1.3480, 1.3568, 1.3627, 1.3797 and 1.3858.

 

OANDA’s Open Position Ratios

The EUR/USD ratio has quieted down, and is showing little movement at present. This is reflected in the pair, which is also showing little movement. Trader sentiment continues to be strongly biased in favor of short positions, so there is an expectation that the euro will continue to lose ground against the US dollar.

After taking a tumble on Thursday, EUR/USD is much quieter, as it trades in the 1.3330 range. Is this just a short pause before the downward trend continues? The US will be releasing consumer and manufacturing data later on Friday, and we could see the pair break out if the readings are not in line with market expectations.

EUR/USD Fundamentals

  • All Day: G-20 Meetings (Day 1).
  • 9:00 Italian Trade Balance. Estimate 2.22B. Actual 2.26B.
  • 10:00 Eurozone Trade Balance. Estimate. 10.7B. Actual 12.0B.
  • 13:30 US Empire State Manufacturing Index. Estimate -2.1 points.
  • 14:00 US TIC Long-Term Purchases. Estimate 34.3B.
  • 14:15 US Industrial Production. Estimate 0.2%.
  • 14:55 US Preliminary UoM Consumer Sentiment. Estimate 74.8 points.
  • 14:55 US Preliminary UoM Inflation Expectations.

 

*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.