EUR/USD has shown strong volatility in Tuesday trading. The pair has bounced back up after outstanding consumer confidence numbers out of Germany and the Eurozone. The pair was trading in the 1.3340 range. Market sentiment rose after the Eurogroup approved an additional installment of aid to Greece. In the US, Republican members of Congress announced they would table a proposal in Congress next week that would extend the debt limit until April. Today’s key release is US Existing Home Sales.
The euro has already had a very busy day. In the Asian session, the euro climbed higher, touching the 1.3370 line. It then retracted back to the 1.33 line early in European trading, but has again bounced higher. EUR/USD received a boost after excellent consumer confidence data from the Eurozone and Germany. Both indicators hit multi-year highs, with their best performance since May 2010. German ZEW Economic Sentiment jumped to 31.5 points, crushing the estimated of 12.2 points. Eurozone ZEW Economic Sentiment also sizzled, hitting 31.2 points. This easily beat the forecast of 14.1 points. The euro shot higher after the news, as the vote of confidence from consumers is a key component for an economic recovery in the Eurozone.
The Eurogroup of Eurozone Finance Ministers met in Brussels on Monday, and the agenda was a busy one. The Eurogroup approved the next installment of bailout funds for Greece, in the amount of 9.2 billion euros. This tranche is made up of EUR 7.2 billion in bonds, to recapitalize Greek banks, and EUR 2 billion in cash for government expenses. The decision boosted market sentiment, as the move was seen as a vote of confidence by the ECB in the ability of Greece to carry on with its economic restructuring program. The Eurogroup also started talks on how to best utilize the European Stability Mechanism, the Eurozone’s emergency bailout fund. The Eurogroup is taking a close look at direct bank recapitalization, whereby banks would borrow directly from the ESM. This is intended to replace the process whereby governments simply borrow more funds to bolster their ailing banks. As with most major issues affecting the Eurozone, there are deep divisions on this issue. The front-line members who are being touted for further aid include Spain, Cyprus and Greece.
In the US, there was a new development in budget negotiations, which have been stalled due to sharp disagreements between the Republicans and Democrats. The Republicans have announced that they will table a proposal in Congress which would extend the debt ceiling until April 15. This would allow the U.S. government to borrow enough money to keep it fully operating for the next three months until the sides can reach an agreement. However, the sides are far apart on the issue of spending cuts, so we can expect more fireworks on Capitol Hill before the spring thaw.
EUR/USD for Tuesday, January 22, 2013
EUR/USD January 22 at 11:00 GMT
1.3348 H: 1.3372 L: 1.3267
EUR/USD is showing significant volatility in Tuesday trading. The pair has bounced back after dropping close to the 1.33 line earlier. 1.3240 was briefly breached, but has remains intact as the pair has pushed higher. On the upside, 1.3350 has already seen activity in the Asian session, and is facing strong pressure from the pair. 1.34 is providing stronger resistance.
Current range: 1.3280 to 1.3350.
Further levels in both directions:
Below: 1.3280, 1.3240, 1.3170, 1.3130, 1.3080, 1.3030, 1.30 and 1.2960, 1.2835 and 1.2805.
Above: 1.3350, 1.34, 1.3480, 1.3568 and 1.3627, 1.3797 and 1.3858.
OANDA’s Open Position Ratios
The EUR/USD ratio has reversed direction, as we are currently seeing movement towards short positions. The fluctuation in the ratio is reflected in the movement of the pair, which has also reversed direction as the EUR/USD loses ground. Trader sentiment continues to be strongly biased in favor of short positions.
The pair is trading very close to the 1.33 line, but has had a very busy day, as it climbed all the way up to the 1.3370 range before coughing up these gains. We could see the volatility continue as the pair is having difficulty finding its footing.
- All Day: ECOFIN Meetings.
- 10:00 German ZEW Economic Sentiment. Estimate 12.2 points. Actual 31.5 points.
- 10:00 Eurozone ZEW Economic Sentiment. Estimate 14.1 points. Actual 31.2 points.
- Tentative: Spanish HPI.
- 15:00 US Existing Home Sales. Estimate 5.09M.
- 15:00 US Richmond Manufacturing Index. Estimate 4 points.
- 18:00 ECB President Draghi Speaks.
*Key releases are highlighted in bold
*All release times are GMT