EUR/USD – Euro Pushes Past 1.36 As Retail Sales Shines

EUR/USD continues to make inroads against the US dollar in Thursday trading. The pair rose above the 1.36 level for the first time since February, as the euro received a boost from a solid Eurozone Retail Sales release on Thursday. In other news, ECB head Mario Draghi sounded positive about the Eurozone recovery, and the Italian government survived a vote of no confidence. Over in the US, today’s highlights are ISM Non-Manufacturing PMI and Unemployment Claims. The markets are expecting weaker numbers from both indicators. Meanwhile, the government shutdown continues, as Congress has been unable to reach an agreement that would end the budget impasse.

The US government remains paralyzed as the battle in Congress continues over the federal budget. With the government lacking funds to operate, it has been forced to close non-essential services and send almost a million government workers home. The Republicans and Democrats are entrenched in their positions, but public resentment may force the politicians to get their act together quickly. If things are resolved sometime this week, it will have been more of a nuisance than a crisis. However, a much more serious crisis could occur in two weeks if Congress doesn’t reach an agreement on raising the debt ceiling. If that happens, the Treasury would be unable to pay all of its bills, and the economic fallout could be tremendous. With all the bad blood between the Democrats and Republicans, reaching an agreement on the debt ceiling could prove a difficult task.

As widely expected, the ECB maintained its key interest rate at 0.50%. There was more interest in the follow-up press conference, which has become more of a market-moving event than the rate announcement. At the press conference, ECB President Draghi downplayed risks to the fragile Eurozone economy, and repeated that interest rates would remain at current or lower levels for an “extended period of time” given the low growth levels and weak inflation in the Eurozone.

In Italy, there was some positive news on both the political and economic fronts. Prime Minister Enrico Letta easily won a no-confidence vote in the Senate, after ex-PM Silvio Berlusconi supported the government, despite an earlier threat to withdraw from Letta’s coalition government. As well, Italian Services PMI barreled past the 50-point line for the first time in over two years. The index jumped from 48.8 points in August to 52.7 in September, easily surpassing the estimate of 49.2 points. A reading over 50 indicates expansion. Both events are bullish for the euro, which continues to extend its rally. The euro has gained closed to five cents against the retreating dollar in the past month.

 

EUR/USD for Thursday, October 3, 2013

Forex Rate Graph 21/1/13
EUR/USD October 3 at 11:00 GMT

EUR/USD 1.3601 H: 1.3623 L: 1.3581

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3410 1.3500 1.3585 1.3649 1.3786 1.3893

 

  • The euro continues to put pressure on the dollar in Thursday trading. The pair touched a high of 1.3623 in the Asian session.
  • EUR/USD is facing resistance at 1.3649. This is followed by resistance at 1.3786, which has remained intact since November 2011.
  • The pair is receiving support at 1.3585. This weak line could fall if the US dollar shows any signs of recovery. The round number of 1.3500 has strengthened as the pair trades at higher levels.
  • Current range: 1.3585 to 1.3649

 

Further levels in both directions:

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

 

OANDA’s Open Positions Ratio

EUR/USD ratio has reversed directions and is pointing to movement towards short positions in Thursday trading. This is reflected in the current movement of the pair, as the euro has posted modest gains against the dollar. The ratio continues to have a solid majority of short positions, indicative of a strong trader bias towards the US dollar reversing direction and climbing to higher ground.

EUR/USD continues to improve and is now above the 1.36 line. The US will release key employment and services data later in the day, so we could see some volatility from the pair later in the North American session.

EUR/USD Fundamentals

  • 7:15 Spanish Services PMI. Estimate 50.9 points. Actual 49.0 points.
  • 7:45 Italian Services PMI. Estimate 49.3 points. Actual 52.7 points.
  • 8:00 Eurozone Final Services PMI. Estimate 52.1 points. Actual 52.1 points.
  • 8:44 Spanish 10-year Bond Auction. Actual 4.27%.
  • 8:57 French 10-year Bond Auction. Actual 2.37%.
  • 9:00 Eurozone Retail Sales. Estimate 0.3%. Actual 0.7%.
  • 11:30 US Challenger Job Cuts.
  • 12:30 US Unemployment Claims. Estimate 315K.
  • 14:00 US ISM Non-Manufacturing PMI. Estimate 57.2 points.
  • 14:30 US Natural Gas Storage. Estimate 96B.
  •  17:30 US FOMC Member Jerome Powell 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.