EUR/USD – Drops Below 1.30 as US Numbers Improve

The EUR/USD continues to lose ground, as the pair dipped below the 1.30 level on Friday. The dollar strengthened thanks to improving US employment numbers, which has raised speculation that the US Federal Reserve could terminate its quantitative easing program earlier than expected. US releases ended a slow week on a positive note, as the Federal Budget Balance posted a surplus that was higher than expected. In the Eurozone, Monday’s only release is a meeting of EU finance ministers in Brussels. In the US, the there are two major releases – Retail Sales and Core Retail Sales. 

The euro’s slide continues, as the continental currency has lost close to two cents against the dollar since Thursday. The US dollar improved after strong US employment numbers and a positive reading from the US Federal Budget. As well, remarks by ECB member Ignazio Visco that the ECB is considering negative deposit rates hurt the euro, as this would lead to the flow of funds out of the Eurozone. The ECB would be the first major central bank to adopt negative deposit rates. Supporters of the idea argue that it would boost lending to businesses and help increase economic activity in the struggling Eurozone.

Last week featured only one major event, US Unemployment Claims. The key indicator looked sharp, pointing to 323 thousand new claims. This easily beat the estimate of 333 thousand. It was the third straight week that Unemployment Claims has beaten expectations. The dollar got a boost from the positive news, but the markets will want to see strong numbers from other sectors of the economy to be convinced that the US is headed in the right direction.

After a bad streak in April, we are seeing better numbers out of the US, notably employment figures. This has raised speculation that the Fed might adjust or even terminate its QE program, in which it buys $85 billion in assets every month. Terminating the QE program is dollar positive, and the US dollar was broadly stronger against all the major currencies on Friday. The markets will be looking for any clues as to the Fed ending QE, which would likely push the dollar higher.

 EUR/USD for Monday, May 13, 2013

EUR/USD 1.2976 H: 1.2980 L: 1.2963

EUR/USD Technical

EUR/USD continues to lose ground, and remains below the 1.30 line. The pair is receiving weak support at 1.2960. This line was tested earlier, and could face more activity. There is a stronger support level at 1.2880. On the upside, the pair faces resistance at the round number of 1.3000. This is followed by a resistance line at 1.3050.

• Current range: 1.2960 to 1.3000

Further levels in both directions:

• Below: 1.2960, 1.2880, 1.2790 and 1.2689
• Above:1.3000,  1.3050, 1.31, 1.3170 and 1.3240

OANDA’s Open Positions Ratio

EUR/USD ratio is showing some movement towards long positions in Monday trading. We are not seeing this reflected in the pair, as the euro is not showing much movement so far in the Monday session. The ratio is close to an even split between short and long open positions, indicating a split among traders with regard as what to expect from the pair.

EUR/USD has settled down in Monday trading, following some sharp losses late last week. With the US releasing key retail sales data, we could see some increased movement from the pair during the day.

EUR/USD Fundamentals

• All Day: Eurogroup Meetings.
• 12:30 US Core Retail Sales. Estimate -0.1%.
• 12:30 US Retail Sales. Estimate -0.3%.
• 14:00 US Business Inventories. Estimate 0.3%.

*Key releases are highlighted in bold

*All release times are GMT

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