After a fair bit of volatility last week, EUR/USD has started the new trading week on a quiet note, and is trading in the low-1.32 range. The euro took advantage of a broadly weak dollar, climbing over two cents last week. On Friday, US Non-Farm Payrolls looked positive and beat the forecast. In Monday’s releases, French Industrial Production was excellent, rising 2.2%. This is the indicator’s sharpest rise since January 2011. In the US, today’s only release is a speech by FOMC Member James Bullard.
Recent ECB policy meetings have resulted in strong volatility from the euro, and last week was no exception. EUR/USD sparkled after Thursday’s policy meeting, gaining about 150 points, as the euro tested the 1.33 level. As expected, the ECB maintained its benchmark rate at 0.50% and deposit rates at 0%. There has been talk of lowering deposit rates into negative territory, but so far the ECB has not taken any action in this direction. In his remarks, ECB President Mario Draghi downgraded the forecast for Eurozone growth in 2013 from 0.6% to 0.5%. However, for 2014, Draghi hiked the forecast from 1.0% to 1.1%. The markets seemed pleased with Draghi’s comments, and the euro surged against the dollar, which was broadly weaker against the major currencies.
US employment numbers were a mix last week. ADP Non-Farm Payrolls slipped badly, as the key employment indicator missed the estimate for the third consecutive month. The indicator posted a reading of 135 thousand, well off the forecast of 171 thousand. Unemployment Claims managed to meet the estimate, but the market reaction was lukewarm. Non-Farm Payrolls was strong, climbing from 165 thousand to 175 thousand. This was above the market forecast of 167 thousand. The Unemployment Rate rose edged higher to 7.6%, above the forecast of 7.5%. With speculation growing that the Fed could scale back QE in the next few months, employment figures have taken on added significance. However, the Fed may decide to hold a steady course if the employment picture remains cloudy.
The ECB is headed to court, as the Federal Constitutional Court, Germany’s top court, reviews the constitutionality of the ECB’s OMT (Outright Monetary Transactions) program later this week. Under the OMT rescue program, the ECB purchases bonds from members whose economies are in trouble. Last week, ECB head Mario Draghi stated that OMT had helped bring stability to the global markets and was a key monetary policy measure. Draghi’s optimistic view lies in sharp contrast to that of Bundesbank President Jens Weidmann, who voted against OMT In previous cases involving the legality of ECB rescue mechanisms, the German court has given its approval, but has sometimes added provisos. So we can expect the court to rule that OMT is legal, although it could be a qualified ‘yes’.
EUR/USD for Monday, June 10, 2013
EUR/USD 1.3221 H: 1.3230 L: 1.3177
EUR/USD is trading quietly in the Monday session, as the proximate support and resistance lines remain in place (S1 and R1 above). On the downside, 1.3162 continues to provide support. The next support level is at the round number of 1.3100. On the upside, the pair faces resistance at 1.3271. This is followed by resistance at 1.3351.
- Current range: 1.3162 to 1.3271
Further levels in both directions:
- Below: 1.3162, 1.3100, 1.3050, 1.3000 and 1.2955
- Above: 1.3271, 1.3353, 1.3477 and 1.3586
OANDA’s Open Positions Ratio
Last week, EUR/USD ratio showed strong movement in favor of short positions. However, this has changed in the Monday session, as we are seeing movement towards long positions. Currently, EUR/USD is trading very quietly, but the movement in the ratio could signify that we will see a correction and the pair will move lower.
The euro has settled down after sharp gains late last week, and is trading in the low-1.32 range. As there are no major releases out of the US or the Eurozone, we could be in for a quiet Monday session.
- 6:45 French Industrial Production. Estimate 0.2%. Actual 2.2%.
- 6:45 Italian Industrial Production. Estimate 0.1%. Actual -0.3%.
- 8:30 Eurozone Sentix Investor Confidence. Estimate -10.0 points. Actual -11.6 points.
- 13:50 US FOMC Member James Bullard Speaks.
*Key releases are highlighted in bold
*All release times are GMT