EUR/USD – Almost Unchanged as US Faces Government Shutdown

EUR/USD is showing very little movement in Monday’s European session. The pair is trading very close to the 1.35 line, a pattern we saw over the course of last week. As we start the new trading week, all eyes are on Congress as a deadlock over the budget threatens to close down the US government. There is also political instability in Europe, as Italy’s government has collapsed after ex-PM Silvio Berlusconi pulled his ministers out of the coalition government. In economic news, there are only a handful of releases on Monday. German Retail Sales posted a gain of 0.5% but fell well short of expectations. In the US, the sole release is Chicago PMI, with the markets expecting the index to rise in August.

It’s crunch time in Washington, as the US government will find itself without funds to operate if Congress fails to break the budget impasse on September 30, the last day of the current financial year. If that happens, non-essential government services would be forced to shut down. This last happened in 1996, and politicians on both sides of the divide will be trying to hammer out an agreement so that the government can keep operating. Both sides seem entrenched in their positions. Republicans want to defund Obamacare before they approve a budget, and the Democrats are determined to protect their health care bill. This crisis, which would likely affect the currency markets, could be a dress rehearsal for a much more serious crisis, which will occur in two weeks if Congress doesn’t raise the debt ceiling.

In Italy, the government collapsed over the weekend, as ex-PM Silvio Berlusconi pulled his ministers out of the coalition government led by Enrico Letta. Berlusconi urged Letta to dissolve parliament and call new elections, but Letta has opted to seek a vote of confidence on Wednesday, hoping to keep his battered coalition together. Italian politics are often full of surprises and twists, and we could be in for quite a show this week.

EUR/USD for Monday, September 30, 2013

EUR/USD 1.3500 H: 1.3512 L: 1.3478

EUR/USD Technical

• EUR/USD is very quiet in Monday trading, as it continues to test the 1.35 line on the downside. This is followed by support at 1.3410.
• The pair continues to face strong resistance at 1.3585. The next line of resistance is at 1.3649. This line has remained intact since February.
• Current range: 1.3500 to 1.3585

Further levels in both directions:

• Below: 1.3500, 1.3410, 1.3300, 1.3162 and 1.3100
• Above: 1.3585, 1.3649, 1.3786, 1.3893 and 1.4000

OANDA’s Open Positions Ratio

EUR/USD ratio continues where it left off on Friday, showing little movement on Monday. This is reflected in the current movement of the pair, which is trading quietly. The ratio continues to have a solid majority of short positions, indicative of a strong trader bias towards the US dollar moving to higher ground.

EUR/USD is trading slightly above the 1.35 line, continuing to trade quietly. We could see some volatility from the pair during the day as Congress makes a last-ditch effort to resolve the budget deadlock gripping Washington.

EUR/USD Fundamentals

• 6:00 German Retail Sales. Estimate 0.9%. Actual 0.5%.
• 9:00 Eurozone CPI Flash Estimate. Estimate 1.3%. Actual 1.1%.
• 9:00 Italian Preliminary CPI. Estimate 0.3%. Actual -0.3%.
• 13:45 US Chicago PMI. Estimate 54.5 points.

*Key releases are highlighted in bold

*All release times are GMT

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