EUR/USD – Euro Moves Higher as Markets Await US Employment Data

EUR/USD has moved higher, and has pushed above the 1.31 level in Thursday’s European session. The pair broke above the 1.31 line on Wednesday, but could not sustain the move and retracted to the mid-1.30 line. Will the euro be able to hold onto today’s gains? In economic news, German and French CPI releases were within market expectations. The ECB released its monthly bulletin, and analysts will be reviewing the report carefully for any clues as to the ECB’s future monetary policy. Today’s highlight is US Unemployment Claims, which are the first numbers out of the US this week.

The Federal Open Market Committee released its meeting minutes on Wednesday, and the most exciting thing about the release was that it was leaked several hours ahead of schedule. The Federal Reserve was not amused, and has ordered an investigation into the matter. The minutes themselves turned out to be a non-event, with policymakers divided as to the extent and duration of the current round of QE. Some members wanted to wind down the program in the middle of 2013, while others felt it was more appropriate to wait until the end of the year. There was also discussion about whether to decrease the amount of asset purchases immediately, or continue the present levels until the end of the year. The division in opinion reflects uncertainty over the extent of the US recovery and the health of the economy. With the US reeling off a host of poor releases throughout April, FOMC members might have had a different take on the QE program had the meeting taken place in April rather than March.

Portugal was back in the news as the country’s Constitutional Court struck down some austerity measures that the government announced earlier this year. The measures are part of a bailout package that Portugal received in 2011. The court invalidated steps that included tax hikes worth 5 billion euros, which has left the country 1.4 billion euros short in expected revenue. The economy contracted 3.2% in 2012, and Portugal is behind in its deficit reduction targets. The legal wangling could exacerbate the country’s difficult economic situation and lead to a full-blown crisis, which is the last thing the Eurozone needs.

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. Speaking of Cyprus, there was some good news, with the announcement that a final memorandum of understanding over the bailout between the island country and its international creditors been finalized. The amount of the rescue package is expected to remain at EUR10 billion.

EUR/USD for Thursday, April, 11, 2013

1.3121 H: 1.3126 L: 1.3044

EUR/USD Technical

EUR/USD has crossed above the 1.31 line in the European session. The pair is facing resistance at 1.3170. This is followed by a resistance line at 1.3170. On the downside, 1.31 is providing weak support. This line could continue to be tested. The support level of 1.3030 has strengthened as the pair trades at higher levels.

Current range: 1.31 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 not showing any movement in the Thursday session. This lack of activity is not reflected in the pair, as the euro has posted gains against the US dollar. If this upward trend continues, we are likely to see movement in the ratio as well.

The euro has again pushed across the 1.31 level, as the markets wait for the US to release Unemployment Claims later on Thursday. This key indicator is a market-mover, and an unexpected reading could affect the movement of EUR/USD.

EUR/USD Fundamentals

• 6:00 German Final CPI. Estimate 0.5%. Actual 0.5%.
• 6:45 French CPI. Estimate 0.7%. Actual 0.8%.
• 8:00 ECB Monthly Bulletin.
• 12:30 US Unemployment Claims. Estimate 362K.
• 12:30 US Import Prices. Estimate -0.4%.
• 12:30 US FOMC Member James Bullard Speaks.
• 14:30 US Natural Gas Storage. Estimate -12B.
• 17:00 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

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