EUR/USD has leveled off after posting sharp losses on Friday. The pair is testing the 1.30 level as we begin the new trading week. There are only two releases on Monday, both from the Eurozone. German Trade Balance failed to meet the estimate, while French Industrial Production posted a sharp decline. There are no releases out of the US today.
The euro showed strong volatility last Thursday and Friday. The currency jumped after the ECB maintained interest rates at 0.75%, gaining over a cent at the expense of the US dollar. On Friday, the euro gave up almost all of those gains, dropping just below the 1.30 line to close the week. The euro took a tumble after excellent US employment data, which gave a boost to the dollar. As well, German Industrial Production, which came in at a flat 0.0%, also weighed on the continental currency. EUR/USD is fairly quiet as we start the new trading week, as the pair trades just above the 1.30 line.
On Thursday, ECB policymakers voted to maintain the benchmark interest rate at 0.75%. Although the markets expected the rate to remain steady, and ECB head Mario Draghi didn’t have anything new to share at the ECB press conference, the markets were pleased, and the euro took advantage, gaining a cent against the dollar. Draghi once again reminded us that, yes, the Eurozone economy is having a tough go of it, but things will improve later in the year. Draghi also reassured his listeners that the crisis in Italy would not spread, but did call on member countries to implement needed structural reforms, in what could be seen as a hint to Italy to continue with its austerity measures in order to get its economy headed in the right directions. The ECB’s decision to maintain rates was not unanimous, as some policymakers wanted to lower rates. Given the lackluster performance of the Eurozone, with the notable exception of Germany, the ECB could well step in and lower rates if the Eurozone economy fails to turn around.
US employment numbers sizzled last week. Unemployment Claims dropped to 340K, well below the estimate of 354K. Non-Farm Employment Claims hit 236 thousand, easily exceeding the forecast of 162 thousand. The Unemployment rate fell, dropping to 7.7% from 7.9%. The strong figures helped the dollar post sharp gains against the euro at the end of the week, and we could see the greenback make further gains if US number numbers continue to look sharp. The strong data has raised speculation that the Fed might wind up its current round of QE, which involves the purchase of $85 billion in assets each month. Previously, the Fed has said that the open-ended asset purchases would continue until unemployment fell to 6.5%. However, if the economy continues to show signs of improvement, the Fed will face pressure to wind up or at least modify the current asset purchase program.
EUR/USD for Monday, March 11, 2013
1.3004 H: 1.3025 L: 1.2984
After the roller-coaster ride on Thursday and Friday, EUR/USD is steady in Monday trading. The pair is testing the 1.300 level on the downside. The next line of support is at 1.2950. On the upside, there is resistance at 1.3080. This line has strengthened as the pair trades at lower levels.
- Current range: 1.3280 to 1.3350
Further levels in both directions:
- Below: 1.3000, 1.2950, 1.2882 and 1.2802
- Above: 1.3080, 1.3130, 1.3170, 1.3280, 1.3350 and 1.34
OANDA’s Open Position Ratios
The EUR/USD ratio is showing strong movement towards long positions in Monday trading. This is not reflected in the current movement of the pair, which is very quiet. However, it could signal an expectation for the euro to post gains against the US dollar.
The euro has shown strong movement, as it jumped following the ECB rate decision on Thursday, only to drop back down on Friday, following strong US employment data. Where will the pair go from here? With very little in the way of fundamental releases on Monday, we could see EUR/USD continue to hug close to the 1.30 level.
- 7:00 German Trade Balance. Estimate 17.9B. Actual 15.7B
- 7:45 French Industrial Production. Estimate -0.1%. Actual -1.2%
*Key releases are highlighted in bold
*All release times are GMT
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