EUR/USD – Steady as Markets Eye Fed Policy Statement

EUR/USD has edged higher in Wednesday trading. The pair continues to trade in the mid-1.37 range in the European session. US releases were weak on Tuesday, as Retail Sales, PPI and Consumer Confidence all lost ground in September.  The markets are closely monitoring the US Federal Reserve, which will wrap up a policy meeting with a statement on Wednesday. As well, two key events will be released later in the day – ADP Non-Farm Payrolls and Core CPI. In the Eurozone, Spanish GDP and German Unemployment Change were within market expectations.

The Federal Reserve winds up a policy meeting on Wednesday, its first since Congress hammered out an agreement on the debt ceiling and reopened the government. However, the agreement is little more than a band-aid solution which has pushed off the debt ceiling and budget deadlock for a few months, without resolving these two issues. Meanwhile, recent US data, notably employment numbers, have been sluggish. Given this situation, the Fed is unlikely to push the taper trigger until early 2014. The markets will be waiting for the Fed policy statement later today, and we could see some volatility in the currency markets afterwards.

After last week’s disappointing employment numbers, we’ll get a look at ADP Non-Farm Payrolls on Wednesday. Although this is not an official release, it is a key employment release which can move the markets. Last week, Unemployment Claims came in above the estimate and Non-Farm Payrolls tumbled to a six-month low. The weak readings are weighing on the US dollar, which finds itself close to two-year lows against the euro.

German employment numbers are also causing concern. Unemployment Change came in at 2 thousand in September, just above the estimate of 1 thousand. Although this is a decent reading, this is the indicator’s third consecutive increase, raising concerns that the German economy is slowing down. The jobless rate was unchanged at 6.9 percent. If the Eurozone is to remain out of recession, it can ill afford for Germany, the region’s number one economy, to slow down. We’ll get a look at other key German releases on Thursday.

EUR/USD for Wednesday, October 30, 2013

EUR/USD October 30 at 12:35 GMT

EUR/USD 1.3768 H: 1.3778 L: 1.3733

EUR/USD Technical

• EUR/USD has edged higher in Wednesday’s European session, as the proximate support and resistance levels (S1 and R1 above) remain intact.
• On the downside, 1.3649 is providing support. This is followed by a support line at 1.3585.
• The pair continues to face resistance at 1.3786. This is a weak line which could face pressure during the day. It is followed by a strong resistance line at 1.3893.
• Current range: 1.3649 to 1.3786

Further levels in both directions:

• Below: 1.3649, 1.3585, 1.3500 and 1.3410
• Above: 1.3786, 1.3893, 1.4000, 1.4143 and 1.4247

OANDA’s Open Positions Ratio

EUR/USD ratio is showing an increase in long positions in Wednesday trading. This is consistent with what we are seeing from the pair, as the euro has posted modest gains against the dollar. The ratio continues to be dominated by short positions, indicating a strong trader bias towards the US dollar moving higher against the euro.

EUR/USD has  edged higher on Wednesday. With the Fed Statement and two key releases still to come, we could see some volatility from the pair in the North American session.

EUR/USD Fundamentals

• All Day – German Preliminary CPI. Estimate 0.0%.
• 8:00 Spanish Flash GDP. Estimate 0.1%. Actual 0.1%.
• 8:55 German Unemployment Change. Estimate 1K. Actual 2K.
• 9:10 Eurozone Retail PMI. Actual 47.7 points.
• 10:12 Italian 10-year Bond Auction. Actual 4.11%.
• 10:34 German 10-year Bond Auction. Actual 1.71%.
• 12:15 US ADP Non-Farm Employment Change. Estimate 151K.
• 12:30 US Core CPI. Estimate 0.2%.
• 12:30 US CPI. Estimate 0.2%.
• 14300 US Crude Oil Inventories. Estimate 1.9M.
• 18:00 US FOMC Statement.
• 18:00 US Federal Funds Rate. Estimate <0.25%.

*Key releases are highlighted in bold

*All release times are GMT

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