EUR/ USD – Under Pressure as Eurozone Data Disappoints

EUR/USD remains under pressure in Wednesday trading, as Eurozone numbers were sluggish. In today’s economic releases, French data was a disappointment, as Final Non-Farm Payrolls and CPI fell below market expectations. Eurozone Industrial Production looked weak, dropping to a three month low. In the US, today's key releases include Core Retail Sales and Retail Sales. Speculation of a possible interest rate cut by the ECB, following comments by a senior ECB official, is also weighing on the euro.

The markets were greeted with weak Eurozone data on Wednesday. Earlier this week, French Industrial Production declined sharply, and French numbers continue to look weak. Final Non-Farm Payrolls posted their fifth straight decline, dropping by 0.3%. French CPI gained 0.3%, falling below the estimate of 0.5%. Eurozone Industrial Production didn't look much  better, declining by 0.4%, compared to a 0.7% gain the previous month. The estimate stood at -0.1%. Meanwhile, Jens Weidmann, a senior ECB official, said that that inflation appeared to  be weakening in the Eurozone. The markets interpreted this as a possible hint that the ECB might lower interest rates in the near future. The head of the ECB, Mario Draghi, has reiterated that he expects the Eurozone economy to turn the corner and recover later this year, and Draghi is hoping that this can be achieved without the ECB having to lower interest rates, which are already at record-low levels.

ECB head Mario Draghi continues to sound optimistic about the Eurozone economy, but the Fitch ratings agency isn't buying. On Friday, Fitch downgraded the debts of Italy and Spain, Belgium, Cyprus, and Slovenia. All are members of the Eurozone, and Fitch warned that urgent action was needed to deal with the debt crisis. These downgrades could result in higher borrowing costs for Italy and Spain. Fitch also placed a negative outlook on all five members, meaning that there is greater than 50 percent chance of another downgrade in the next two years. The downgrade is more bad news for Italy, which is struggling with a political crisis and economic malaise. The Eurozone’s third largest economy crisis is struggling with high unemployment, weak growth and a massive debt of EUR 1.9 trillion. With Italy, Spain and France all struggling, and Germany's economy producing mixed numbers, the markets can be forgiven for not sharing Draghi's optimism.

In the US, economic data has looked solid, notably employment numbers. The improving economy has led to speculation that the Fed might end the current round of QE, which involves the purchase of $85 billion in assets each month, earlier than expected. In one possible scenario, the Fed would let the trillions of dollars in securities they have purchased to mature, rather than dump a huge amount of securities on the market. The US economy has been bumpy, and has not responded all that well to the Fed’s massive purchase of assets. This “new exit” strategy could take place later in year, and would be a dramatic shift in the Federal Reserve’s current monetary policy.

 

EUR/USD for Wednesday, March 13, 2013

Forex Rate Graph 21/1/13
EUR/USD March 13 at 10:30 GMT

1.3016 H: 1.3065  L: 1.3010

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.2882 1.2950 1.30 1.3080 1.3130 1.3170

 

EUR/USD has shown some movement in both directions in the European session. The pair continues to trade in the low-1.30 range, as the proximate resistance and support levels remain in place (S1 and R1 above). The pair is facing resistance at 1.3080. This is followed by resistance at 1.3130. On the downside, the round number of 1.30 continues to provide weak support. This line has been under pressure all week, and we can expect this to continue. The next support level is at 1.2950.

Current range: 1.3000 to 1.3080.

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 not showing much movement in Wednesday trading. This is consistent with what we are seeing from the currency pair, which has shown some movement but almost no net change. Trader sentiment continues to be split down the middle, with an even split between long and short open positions.

EUR/USD remains under pressure, but is managing to stay above the 1.30 line. The US releases key retail sales data later on Wednesday, and any unexpected numbers could shake up the pair.

 

EUR/USD Fundamentals

  • 6:30 French Final Non-Farm Payrolls. Exp. -0.2%. Actual -0.3%
  • 7:45 French CPI. Exp. 0.5%. Actual 0.3%
  • 10:00 Eurozone Industrial Production. Exp. -0.1%. Actual -0.4%
  • 12:30 US Core Retail Sales. Exp. 0.5%
  • 12:30 US Retail Sales. Exp. 0.5%
  • 12:30 US Import Prices. Exp. 0.5%
  • 14:00 US Business Inventories. Exp. 0.5%
  • 14:30 US Crude Oil Inventories. Exp. 2.3M
  • 17:00 US 10-year Bond Auction
  • 18:00 US Federal Budget Balance. Exp. -200.0B

 

*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.

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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.