EUR/USD – Euro Loses Ground, Tests 1.34 Line

EUR/USD is showing volatility in Wednesday trading. The pair pushed across the 1.34 level in the Asian session, only to cough up those gains during the European trading. The markets have plenty of releases to digest from both the Eurozone and the US. German PPI numbers were well above the forecast. In the US,  Building Permits and PPI were both within expectations, but Housing Starts fell  below the estimate.

German data continues to look solid, for the most part. German PPI climbed 0.8%, easily beating the forecast of a 0.4% gain. Earlier this week, German ZEW Economic Sentiment shot up, posting its best numbers in almost three years. German Final CPI was not as sharp, posting a 0.5% decline. However, this figure matched the estimate. Are we seeing a comeback by the largest economy in Eurozone? It is no secret that the bloc will need a strong German economy if it has any hope of getting back on its feet, and traders would be wise to treat major German releases as market-movers.  

Earlier in the week, ECB head Mario Draghi discussed the Eurozone and the euro, while testifying before the European Parliament Committee on Economic and Monetary Affairs. Draghi conceded that the Eurozone economy was weak after three straight quarters of negative growth. However, he reiterated the economy is stable, and that the Eurozone economy should improve later this year. On the subject of exchange rates, which has become a hot topic, Draghi stated that the high-flying euro could affect the ECB’s inflation outlook, but reassured his listeners that the euro’s exchange rate was not a policy target.

Currency exchange rates have made their way to the front pages, and at its meeting in Moscow, the G-20 addressed the issue. However, the gathering of finance ministers and central bankers of the world’s leading economies took pains not to ruffle any feathers. In its final statement, the G-20 reaffirmed its commitment not to target exchange rates for “competitive purposes”, and to move more rapidly to market-determined exchange rate systems. The G-20 statement did not make reference to Japan, which has come under heavy criticism from its trading partners as they watch the yen hurtle downwards. We can expect the Japanese government to continue to implement its monetary policy, which will likely push the Japanese currency lower.

 

EUR/USD for Wednesday, Feb 20, 2013

Forex Rate Graph 21/1/13

EUR/USD Feb 20 at 14:30 GMT

1.3384 H: 1.3434 L: 1.3362

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3240 1.3280 1.3350 1.34 1.3480 1.3568

 

EUR/USD has shown a lot of movement, with the 1.34 line in the thick of things. The pair is receiving weak support at 1.3350, and given the current volatility, this line could see some action. There is stronger support at 1.3280. On the upside, the round number of 1.34 is providing resistance, but this is a weak line. This is followed by resistance at 1.3480.

  • Current range: 1.3350 to 1.34.

 

Further levels in both directions:

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

 

OANDA’s Open Position Ratios

The EUR/USD ratio continues to point to movement in the direction of long positions. This is not reflected in the current movement of the pair, as the euro has lost some ground and dipped below 1.34. Trader sentiment continues to be biased in favor of short positions, but the long position component has been steadily gaining strength.

EUR/USD is trading slightly below the 1.34 line, and has shown movement in both directions in Wednesday trading. We could see the fluctations continue, as the markets await a host of key releases from the Eurozone and the US on Thursday.

 

EUR/USD Fundamentals

  • 7:00 German PPI. Estimate 0.4%. Actual 0.8%.
  • 7:00 German Final CPI. Estimate -0.5%. Actual -0.5%.
  • 7:45 French CPI. Estimate -0.2%. Actual -0.5%.
  • German 10-year Bond Auction. Actual 1.66%.
  • 13:30 US Building Permits. Estimate. 0.92M. Actual 0.93M.
  • 13:30 US PPI. Estimate 0.3%. Actual 0.2%.
  • 13:30 US Core CPI. Estimate 0.2%. Actual 0.2%.
  • 13:30 US Housing Starts. Estimate 0.93M. Actual 0.89M.
  • 15:00 Eurozone Consumer Confidence. Estimate -23 points.
  • 19:00 US FOMC Meeting Minutes.

 

*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.