EUR/USD – Cautious Trading to Start Week

EUR/USD continues where it left off last week, trading quietly in the mid-1.30 range. Monday has just two economic releases as we start the new trading week. The Eurozone releases Consumer Confidence, while the US publishes Existing Home Sales, a key release. The markets will be looking for some positive news after a long streak of weak US data.

The political crisis in Italy continues, but at least there is some movement. Over the weekend, there were some dramatic developments, as President Giorgio Napolitano, who was supposed to be replaced, was reelected to a new 7-year term. As well, the leader of the center-left PD party, Pier Luigi Bersani, resigned after losing support within his party. Napolitano will attempt to break the logjam and help the parties put a coalition together. This could be the last opportunity before the country is forced to go to new elections. This would  result in more uncertainty and likely hurt the euro.

Last week, the IMF released a detailed report on global growth, and the news for the Eurozone was not good. The report found that the Eurozone is the weakest part of the global economy, and downgraded its forecasts for Italy, France and Spain. All three are expected to see GDP declines in 2013. The report also downgraded Germany’s growth from 0.9% in January to 0.6%. The IMF urged the ECB to lower interest rates in order to stimulate the stagnant Eurozone economy. Chief Economist Olivier Blanchard was blunt in has assessment, stating that “the slump in the Eurozone is worrisome”.

The markets will be hoping for a turnaround in US numbers, after another dismal week. Thursday saw more key releases and more bad news, as employment and manufacturing numbers disappointed. Unemployment Claims came in at 352 thousand, higher than the estimate of 349 thousand. The Philly Fed Manufacturing Index dropped from 2.0 points to 1.3 points, nowhere near the estimate of 2.7 points. The weak numbers have dogged the US since March, and are raising red flags about the extent of the US recovery.

EUR/USD for Monday, April 22, 2013

1.3046 H: 1.3056 L: 1.3043

EUR/USD Technical

EUR/USD has started the week in subdued fashion. On the upside, the pair is putting pressure on 1.3050. We could see this line fall if the euro posts any gains against the US dollar. There is stronger resistance at the round number of 1.31. On the downside, 1.30 is providing support. The next support level is at 1.2960.

Current range: 1.3000 to 1.3050.

Further levels in both directions:

• Below: 1.30, 1.2960 and 1.2880
• Above: 1.3050, 1.31, 1.3170, 1.3240 and 1.3350

OANDA’s Open Position Ratios

The EUR/USD ratio is starting the week with movement towards short positions. We are not seeing this in the current activity of the pair, as EUR/USD trades quietly. The ratio movement could be an early indication that the euro will lose ground against the US dollar.

After some sharp moves in the middle of last week, the euro continues to trade quietly. The US will release key housing data later today, so we could see some increased activity from the pair if the reading is not consistent with the estimate.

• 12:30 US FOMC Member William Dudley Speaks
• 14:00 Eurozone Consumer Confidence. Exp. -24
• 14:00 US Existing Home Sales. Exp. 5.02M

*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.