EUR/USD – Euro Moves Higher, Testing 1.31

EUR/USD is continuing this week’s upward trend, as the pair is putting strong pressure on the 1.31 level in Wednesday trading. Eurozone numbers were mixed this morning, as French Industrial Production edged above the estimate, while Italian Industrial Production fell to a three-month low. In the US, the markets are waiting for today’s key event, the FOMC Meeting Minutes.

The Cyprus bailout has shaken markets worldwide, the Eurozone economy is sputtering, unemployment is high and even ECB chief  Mario Draghi was not optimistic at last week’s ECB press conference. Despite all these troubles, the euro continues to rally against the dollar, having gained about three cents since the beginning of April. The euro has been helped by disappointing US numbers, as well as some solid data out of Germany this week. However, the severe problems in the Eurozone will not disappear anytime soon and could put a damper on the euro’s current success.

The markets are following events in Portugal, where the country’s Constitutional Court struck down parts of an austerity package that the government announced earlier this year. These steps are part of a bailout package that Portugal received in 2011. The court struck down tax hikes worth about EUR5 billion euros. As a result, Portugal finds itself EUR 1.4 billion short in expected revenue. The economic picture is not good, as the economy shrunk 3.2% in 2012, and Portugal is behind in its deficit reduction targets. The legal tangles could aggravate the country’s difficult economic situation and lead to a full-blown crisis, which would be bad news for the Eurozone and the euro.

The US continues to churn out disappointing numbers, and every key release over the past two weeks has fallen below expectations. The data comes from across the economy – manufacturing, housing, consumer confidence and employment numbers have all missed their estimates. Employment numbers were dismal, and have helped the euro post impressive gains against the US dollar this week. Has the US recovery stalled? The US hasn’t released any key fundamentals so far this week. Unemployment Claims will be released on Thursday, and additional major releases are scheduled for Friday. If the US can turn things around and post some stronger numbers, we could see the dollar improve after losing ground to the euro.

EUR/USD for Wednesday, April 10, 2013

1.3101 H: 1.3122 L: 1.3074

EUR/USD Technical

EUR/USD continues to move higher, and is testing the 1.31 line on the downside. The next level of support can be found at 1.3030. On the upside, the pair faces resistance at 1.3170. This is followed by a resistance line at 1.3240.

Current range: 1.3100 to 1.3170.

Further levels in both directions:

• Below: 1.31, 1.3030, 1.30, 1.2960, 1.2835 and 1.2805
• Above: 1.3170, 1.3240, 1.3350, 1.34

OANDA’s Open Position Ratios

The EUR/USD ratio is showing movement, with an increase in short positions. Currently, the pair is hovering close to the 1.31 line, and is not showing sustained momentum in either direction. The movement in the ratio could reflect an expectation of a correction to the current rally by the euro. Trader sentiment continues to point to a bias in favor of short positions.

The April euro rally continues, as the currency briefly pushed above the 1.31 level earlier on Wednesday. We could see some volatility from the pair as the US releases key events, starting with the FOMC Meeting Minutes today and Unemployment Claims on Thursday.

EUR/USD Fundamentals

• 6:45 French Industrial Production. Estimate 0.6%. Actual 0.7%.
• 8:00 Italian Industrial Production. Estimate -0.4%. Actual -0.8%.
• 14:30 US Crude Oil Inventories. Estimate 1.6M.
• 17:00 US 10-year Bond Auction.
• 18:00 US FOMC Meeting Minutes.
• 18:00 US Federal Budget Balance. Estimate -110.3B.

*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.