EUR/USD – Edges Lower as Eurozone Data Falters

EUR/USD has edged lower in Tuesday trading. The euro dipped below the 1.31 line in the Asian session, and was trading in the 1.350 range in European trading. After a quiet start to the week, Tuesday sees a host of releases out of Europe and the US. Taking a look at today’s releases, Italian Trade Balance was a pleasant surprise, posting an unexpected surplus.  However, ZEW German Economic Sentiment and Eurozone CPI were major disappointments. Later today, ECB head Mario Draghi will address the European Parliament in Strasbourg. In the US, today’s major releases include Building Permits Core CPI and Housing Starts.

What is wrong with the US? The country has produced several weeks of poor releases, underscored by four key readings on Friday, all of which missed their estimates. After strong employment numbers on Thursday, there was hope that the US would rebound, but the wheels fell off the cart on Friday. Core Retail Sales and Retail Sales both declined by 0.4%. PPI dropped 0.6%, and UoM Consumer Sentiment came in at 72.3 points, way off the estimate of 79.1 points. The alarm bells may not have gone off just yet, but the continuing weak numbers are raising concerns about the extent of the US recovery. The markets will be hoping for better news from Tuesday’s numbers. 

The Cyprus bailout agreement has been signed, but is the crisis really over? Eurogroup finance ministers met last Friday and approved a EUR 10 billion loan to Cyprus. Under the agreement, Cyprus will have to kick in EUR13 billion. Back in March, Cyprus was only supposed to add another EUR 7 billion. However, the deal collapsed after Cyprus balked at taxing every bank deposit in the country following a huge outcry on the island. Cyprus president Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Depositors in the Bank of Cyprus will lose between 37.5% and 60%, while depositors in Laiki Bank could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Even with the bailout, the economy is in for a rough time. Analysts estimate that the country’s GDP will shrink by 13% in 2013 and 2014.

In Italy, not much has happened since the inconclusive election back in February. Coalition negotiations between the parties have gone nowhere. Mario Monti remains head of a caretaker government, which is little more than a lame duck, unable to continue with economic reforms. Monti and center-left leader Pier Luigi Bersani are close to an agreement to choose a successor to President Giorgio Napolitano, who will step down in mid-May. The crisis in the Eurozone’s third largest economy threatens to undermine the Eurozone, and the markets are hoping that the choosing of a new president will be the first step in the formation of a new government.

 

EUR/USD for Tuesday, April 16, 2013

Forex Rate Graph 21/1/13
EUR/USD April 16 at 8:45 GMT

1.3043 H: 1.3084 L: 1.3031

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.2835 1.2960 1.3000 1.3050 1.31 1.3170

 

EUR/USD has lost ground in Tuesday trading. On the upside, the pair is testing the 1.3050 line. This line could fall if the euro is able to muster any upward momentum. The next resistance line is at the round number of 1.31. On the downside, the important line of 1.30 continues to provide support.  It has held firm since early last week. The next support level can be found at 1.2960.

Current range: 1.3000 to 1.3050.

Further levels in both directions:

  • Below: 1.30, 1.2960, 1.2835 and 1.2805
  • Above: 1.3050, 1.31, 1.3170, 1.3240, 1.3350, 1.34

 

OANDA’s Open Position Ratios

The EUR/USD ratio is showing little movement in Tuesday trading. This is consistent with what we are seeing from the pair, which has not shown much activity today. Traders should continue to monitor the ratio, as renewed movement could be an early indication of activity  from EUR/USD.

The euro has edged lower, and is trading in the mid-1.30 range. We could see the currency lose ground following some weak data out of the Eurozone. As well, there are two key releases out of the US, and these could also impact on the direction of EUR/USD.

EUR/USD Fundamentals

  • 8:00 Italian Trade Balance. Exp. -1.41B. Actual 1.09B
  • 9:00 German ZEW Economic Sentiment. Estimate 41.5 points. Actual 36.3 points
  • 9:00 Eurozone CPI. Estimate 1.7%. Actual 1.7%
  • 9:00 Eurozone Core CPI. Estimate 1.4%. Actual 1.5%
  • 9:00 Eurozone Economic Sentiment. Estimate 31.5 points. Actual 24.9 points
  • 12:00 US FOMC Member William Dudley Speaks
  • 12:30 US Building Permits. Estimate 0.94M
  • 12:30 US Core CPI. Estimate 0.2%
  • 12:30 US CPI. Estimate 0.0%
  • 12:30 US Housing Starts. Estimate 0.93M
  • 13:00 ECB President Mario Draghi Speaks
  • 13:15 US Capacity Utilization Rate. Estimate 78.4%
  • 13:15 US Industrial Production. Estimate 0.3%
  • 14:00 US Treasury Secretary Jack Lew Speaks
  • 16:00 US FOMC Member Elizabeth Duke Speaks
  • 19:00 US FOMC Member Janet Yellen Speaks
  • 19:00 US Treasury Secretary Jack Lew Speaks

 

*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.