The US dollar continues to put pressure on the euro, which has now fallen below the important 1.30 level. The euro posted losses on Wednesday, after the US released more positive numbers. Retail Sales and Core Retail Sales both posted gains and beat expectations, as the outlook for the US economy continues to brighten. EUR/USD was trading in the mid-1.29 range in Thursday’s European session. EU leaders gather for a two-day economic summit which begins on Thursday, and the ECB releases its monthly bulletin. In the US, there are two key releases today – PPI and Unemployment Claims.
ECB head Mario Draghi has all but guaranteed that the Eurozone economy will recover later in 2013, 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 Italy, the political deadlock which has paralyzed the country for several weeks continues. The Italian Parliament will meet on Friday for the first time since the elections to try and sort out the mess. Most Italians do not want to go through yet another election, but so far, the political leaders have not made little progress in coalition negotiations. The financial markets remain concerned, and Italy’s three-year borrowing costs rose to their highest since December at an auction earlier this week. This comes right after Italy was treated to a credit downgraded by the Fitch ratings agency. If Italy fails to form a government soon, the crisis could impact on the Eurozone, and the euro will likely nosedive.
Recent US data has looked sharp, notably employment numbers and consumer spending data. The markets have reacted with a thumbs up, and this has helped the dollar post gains against the euro. The strong numbers have spread to other sectors as well, as Import Prices, Business Inventories and Crude Oil Inventories were all better than expected. After months of mixed data out of the US, the string of strong numbers is welcome news. We’ll see if the positive trend continues, as the US releases Unemployment Claims and PPI later on Thursday.
EUR/USD for Thursday, March 14, 2013
1.2937 H: 1.2981 L: 1.2934
EUR/USD is now becoming more familiar with 1.29 territory, as it trades in the low 1.29 range. The pair is facing resistance at 1.2950. This is a weak line and could see further activity. The round number of 1.30 is the next line of resistance. On the downside, 1.2882 is a weak line of support, and could face pressure if the euro continues to slump. The next support level is at 1.2802, protecting the 1.28 level.
- Current range: 1.2882 to 1.2950
Further levels in both directions:
- Below: 1.2882, 1.2802, 1.2757 and 1.2683
- Above: 1.2950, 1.3000, 1.3080, 1.3130, 1.3170 and 1.3280
OANDA’s Open Position Ratios
After a very quiet Wednesday, the EUR/USD ratio is back in action, pointing to movement towards short positions. This is in line with what we are seeing from the pair, as the euro continues to drop in Thursday trading. Note that the ratio remains closely split, as trader sentiment remains divided over what to expect from EUR/USD.
The euro is struggling, and has lost about a cent against the dollar since Wednesday. Will the downward trend continue? The US will be releasing PPI and Unemployment Claims, and if these key indicators beat expectations, we could see the dollar continue to manhandle the shaky euro.
- 9:00 ECB Monthly Bulletin
- Day 1: EU Economic Summit
- 10:00 Eurozone Employment Change. Estimate -0.1%. Actual -0.3%
- 12:30 US PPI. Estimate 0.7%
- 12:30 US Unemployment Claims. Estimate 348K
- 12:30 US Core PPI. Estimate 0.2%
- 12:30 US Current Account. Estimate -111B
- 13:00 FOMC Member Sarah Bloom Raskin Speaks
- 14:30 US Natural Gas Storage. Estimate -136B
- 17:00 US 30-year Bond Auction
- 21:30 US Bank Stress Test Results
*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.