EUR/USD – Holding Steady After Mixed Eurozone Numbers

EUR/USD is steady in Tuesday trading, as the pair trades in the mid-1.28 range. European markets are back in action after a break for the Easter holiday, and posted mixed results.  Spanish and Italian PMIs were also a disappointment, missing their estimates. On the bright side, both Spain and Italy reported employment numbers which were better than expected. However, Eurozone Unemployment edged higher, from 11.9% to 12.0%. In the US, the week began on a sour note, as ISM Manufacturing PMI failed to meet expectations. In the US, today’s major release is Factory Orders.

The markets continue to cast a worried eye at Cyprus. The bailout agreement worth EUR13 billion may have been signed, but the drama and uncertainty in the small island country continue. Capital controls are still in place in Cyprus, as the government takes strict measures in order to head off a run on the banks by nervous deposit holders. Under the agreement, bank deposits under EUR100,000 will  be left untouched, but there is confusion and uncertainty as to what will happen to larger accounts, which have been frozen. There is plenty of speculation about what will happen, with rumors that these accounts could get hit with huge taxes of up to 40%. We can expect the euro to remain under pressure while the uncertainty continues.

In Italy, the political paralysis continues, and the situation is truly bewildering, even by Italian standards. Coalition talks have made no progress so far, with the anti-establishment Five-Star movement, which won more votes than any other party, showing no flexibility. In desperation, Italian President Napolitano has appointed a panel of 10 experts, including politicians and a central bank official, in order to find some solution. The Italian media has playfully dubbed the panel the “Ten Wise Men”. All humor aside, the panel will have their hands full trying to reach some resolution to the inconclusive election, which has left the Eurozone’s third largest economy in a deep political crisis. In economic news, Italian Manufacturing PMI dropped from 45.8 points to 44.5, missing the estimate of 45.4. However, the unemployment rate improved slightly, dropping to 11.6%. This beat the estimate of 11.8%.

US releases were a bust last week, with poor data across a range of sectors, including housing and employment. The new week did not start well, as the ISM Manufacturing PMI dropped sharply from 54.2 points to 51.3 points, way below the estimate of 54.2 points. If this week continues in a downward trend, we could see a negative reaction from the markets. The major events for this week include: ISM Non-Manufacturing PMI and key employment numbers.

 

 EUR/USD for Tuesday, April 2, 2013

Forex Rate Graph 21/1/13
EUR/USD April 2 at 10:25 GMT 

1.2855  H: 1.2877 L: 1.2825

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.2689 1.2757 1.2805 1.2880 1.2950 1.3000

 

In Tuesday trading, EUR/USD is showing movement in both directions, but has been unable to sustain much momentum, as the pair trades in the mid-1.28 range. EUR/USD is receiving support at 1.2805. This is followed by support at 1.2757. On the upside, 1.2880 continues to provide resistance. This line could see some activity if the euro can improve against the dollar. There is strong resistance at 1.2950.

Current range: 1.2805 to 1.2880

Further levels in both directions:

  • Below: 1.2805, 1.2757, 1.2689, 1.2624, 1.2495
  • Above: 1.2880, 1.2950, 1.3000 and 1.3080

 

OANDA’s Open Position Ratios

The EUR/USD ratio is close to an event split, indicating that trader sentiment is divided with regard to where EUR/USD is headed. With the European markets closed on Monday for Easter, the pair has been fairly quiet this week, with no clear direction.

Eurozone data was a mix on Tuesday, and EUR/USD did not show much movement. We can expect more action as the markets keep on eye on the ECB’s policy meeting on Thursday, at which time the ECB will set the new benchmark interest rate.

 

EUR/USD Fundamentals

  • All Day: German Preliminary CPI. Estimate 0.4%.
  • 7:00 Spanish Unemployment Change. Estimate 30.2K. Actual -5.0K.
  • 7:15 Spanish Manufacturing PMI. Estimate 46.2 points. Actual 44.2 points.
  • 7:45 Italian Manufacturing PMI. Estimate 45.4 points. Actual 44.5 points.
  • 8:00 Eurozone Final Manufacturing PMI. Estimate 46.6 points. Actual 46.8 points.
  • 8:00 Italian Monthly Unemployment Rate. Estimate 11.8%. Actual 11.6%.
  • 9:00 Eurozone Unemployment Rate. Estimate 12.0%. Actual 12.0%.
  • 14:00 US Factory Orders. Estimate 3.1%.
  • 14:00 US IBD/TIPP Economic Optimism. Estimate 46.1 points.
  • All Day: US Total Vehicle Sales. Estimate 15.3M.

 

*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.